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HABITS, SAVING PROPENSITY, AND ECONOMIC GROWTH

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Author(s): Wei-Bin ZHANG

Journal: Scientific Bulletin : Economic Sciences
ISSN 1583-1809

Volume: 11;
Issue: 2;
Start page: 3;
Date: 2012;
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Keywords: habit stock | propensity to save | endogenous preference | economic growth

ABSTRACT
The purpose of this paper is to study economic growth with preference change on the basis of the Solow one-sector growth model, Zhang’s alternative approach to household behavior, the Ramsey growth theory with time preference, and the traditional growth model with habit formation. The propensity to save is dependent on wealth and current income and the propensity to consumption is related to the habit stock. We simulate the model and demonstrate the motion of the economic dynamics with endogenous preference. We also examine effects of changes in some parameters on the motion of the economic system.
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