Limited Self-Control and Long-Run Growth
2016 | journal article
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Details
- Authors
- Strulik, Holger
- Abstract
- This paper integrates imperfect self-control into the standard model of endogenous growth. In their long-run savings decisions individuals take into account a cost of self-control, which depends on the consumption temptations of their impatient short-run self. I obtain a closed-form solution for consumption and show that within a certain range of self-control an investment subsidy can be useful in order to reduce consumption and to increase investment, growth, and welfare of the long-run self. A consumption tax, perhaps surprisingly, is found to be counterproductive. It induces individuals with limited self-control to consume even more.
- Issue Date
- 2016
- Journal
- Mathematical social sciences
- Language
- English