Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88598
Authors: 
Strulik, Holger
Year of Publication: 
2013
Series/Report no.: 
Discussion Papers, Center for European Governance and Economic Development Research 181
Abstract: 
This paper integrates imperfect self-control into the standard model of endogenous growth. Individuals are conceptualized as dual-selves consisting of a long-run planner and a short-run doer. The long-run self can partly control the short-run self´s strife for immediate gratification. It is shown that the solution is structurally equivalent to the one of the standard endogenous growth model as long as self-control is sufficiently strong. 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 counterproductive. It induces individuals with limited self-control to consume even more.
Subjects: 
temptation
self-control
consumption
investment
endogenous growth
JEL: 
D91
E21
O40
Document Type: 
Working Paper

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