Should the Neoclassical growth model include the saving flow in the Utility function?

Khelifi, Atef (2014): Should the Neoclassical growth model include the saving flow in the Utility function?

Abstract

Despite ‘joy of giving models’ have been extensively examined in the literature, the Ramsey growth model has never been explored under the assumption of a direct preference for bequeathing savings that are reinvested. This assumption implies a Utility function depending on both consumption and savings, which may also be motivated as one that captures a direct preference for thriftiness or wealth accumulation arguably involved. The resulting growth model generalizes those accounting for the capitalist spirit as Zou (1994), and shows that the restrictive standard one is perhaps not the actual optimized version of the Solow model. (JEL O41, E21, D91)

• Item Type: MPRA Paper
• Language: English
• Keywords: Bequest;Capitalist Spirit;Ramsey Growth model;Savings;Joy-of-giving;Optimal control theory
• Subjects: D - Microeconomics > D0 - General; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; E - Macroeconomics and Monetary Economics > E0 - General; E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models

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