In the following series of papers, we provide OLG - general equilibrium - models with endogenous tastes. First period utility depends negatively on the consumption of the parents (the idea is that children get habituated to a living standard while living with their parents). Higher parental consumption leads to increased impatience. One conclusion is that inherited tastes can be the source of long-lasting fluctuations.
Wealth breeds decline: Reversals of leadership and consumption habits, Journal of Economic Growth, 9, 423-449, 2004 [with L. Artige and C. Camacho].
Growth dynamics and education spending: the role of inherited tastes and abilities, European Economic Review, 45, 1415-1438, 2001.
Altruism and self-restraint, Annales d'Economie et de Statistique, 63-64, 233-259, 2001. [with P. Michel]
Optimal growth when tastes are inherited, Journal of Economic Dynamics and Control, 23, 519-537, 1999. [with P. Michel]
The dynamics of bequeathed tastes, Economics Letters 51, 89-96, 1996.
Habit formation models incorporate the idea that current tastes depend on past experiences. Habit formation has been introduced in various empirical studies and proved useful to explain consumption dynamics. One home-made example is:
and a survey is:
An interesting feature of habit formation is that it can account for the observed fact that reported satisfaction levels do not seem to increase with consumption and / or wages.
We also applied the idea of habit formation to the labor market, assuming either that the utility of unions depend on wage growth on top of wage levels, or that the disutility of effort depends on comparing current wages to past wages.
The two above studies are partial equilibrium ones. In the next one, we analyze a general equilibrium model of the real business cycle type in which effort depends on current, alternative, and past wages (habits). This last model reproduces the high variability of employment, the low variability of wages, and the low wage-employment correlation without requiring a second source of impulsions.