Habit Formation in an Overlapping Generations Model with Borrowing Constraints

2009 ◽  
Vol 17 (4) ◽  
pp. 705-725 ◽  
Author(s):  
Amadeu DaSilva ◽  
Mira Farka ◽  
Christos Giannikos
Keyword(s):  
Overlapping Generations ◽  
Habit Formation ◽  
Borrowing Constraints ◽  
Overlapping Generations Model

scholarly journals OUTWARD HABITS AND ENVIRONMENTAL QUALITY IN AN OVERLAPPING GENERATIONS MODEL

2021 ◽  
Vol 6 (1) ◽  
pp. 42-50
Author(s):  
Fatma Safi
Keyword(s):  
Environmental Quality ◽  
Overlapping Generations ◽  
Habit Formation ◽  
The State ◽  
Overlapping Generations Model ◽  
Consumption Decisions ◽  
Current Consumption ◽  
Consumption Activity ◽  
State Of The Environment ◽  
Average Consumption

Outward habit formation affects consumption decisions. Since consumption displays a negative environmental externality, outward habits has as well an (adverse) effect on the environment. This research paper centers around the theoretical linkage between the combination of both externalities (environmental deterioration and outward habits). The objective of this study is to examine the impacts of outward habits on the state of the environment in the context of an overlapping generations economy. In our study, environmental quality is a public good negatively affected by consumption activity and positively affected by maintenance investment. With outward habit formation, the build-up level of average past consumption in the economy at large influences the current utility of an individual consumer. Thus, individuals draw utility not only from their own level of current consumption, but also from its level relative to the average consumption in the economy. How does outward habit influence the state of the environment? We analyze this question using an overlapping generations model with outward habit and environmental quality in the utility function. In steady state equilibrium allocation, we show that whether outward habits are destructive to the environment depends on the degrees of outward habit formation and the size of the economy.

scholarly journals INCOME INEQUALITY, MOBILITY, AND THE WELFARE STATE: A POLITICAL ECONOMY MODEL

2012 ◽  
Vol 17 (6) ◽  
pp. 1198-1226 ◽  
Author(s):  
Luca Bossi ◽  
Gulcin Gumus
Keyword(s):  
Income Inequality ◽  
Welfare State ◽  
Social Insurance ◽  
Overlapping Generations ◽  
Tax Rates ◽  
Overlapping Generations Model ◽  
Public Programs ◽  
Transfer Payments ◽  
Set Up ◽  
The Welfare State

In this paper, we set up a three-period stochastic overlapping-generations model to analyze the implications of income inequality and mobility for demand for redistribution and social insurance. We model the size of two different public programs under the welfare state. We investigate bidimensional voting on the tax rates that determine the allocation of government revenues among transfer payments and old-age pensions. We show that the coalitions formed, the resulting political equilibria, and the demand for redistribution crucially depend on the level of income inequality and mobility.

scholarly journals Endogenous Agency Problems and the Dynamics of Rents

2020 ◽  
Vol 87 (6) ◽  
pp. 2542-2567
Author(s):  
B Biais ◽  
A Landier
Keyword(s):  
Overlapping Generations ◽  
Agency Problems ◽  
Overlapping Generations Model ◽  
Complex Tasks ◽  
Complex Skills ◽  
Do So

Abstract While potentially more productive, more complex tasks generate larger agency rents. Agents therefore prefer to acquire complex skills, to earn large rents. In our overlapping generations model, their ability to do so is kept in check by competition with predecessors. Old agents, however, are imperfect substitutes for young ones, because the latter are easier to incentivize, thanks to longer horizons. This reduces competition between generations, enabling young managers to go for larger complexity than their predecessors. Consequently, equilibrium complexity and rents gradually increase beyond what is optimal for the principal and for society.

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