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A Closed‐form Solution of a Two‐sector Endogenous Growth Model with Habit Formation

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Australian Economic Papers

Published online on

Abstract

This paper determines a closed‐form solution of the two‐sector endogenous growth model with habit formation. Differently to the paper of Hiraguchi, but similar to other approaches as those of Gomez, Turnovsky and Monteiro, we consider that the habits are formed in an external manner and enter additively into the utility function.