Habit Formation, Public Capital Congestion Effect and Economic Growth

This paper constructs an endogenous growth model including habit formation and public capital congestioneffect, and analyzes the influence of fiscal policy and public capital congestion effect on economic growth under theframework of habit formation. It is found that under decentralized economy, there exists a unique equilibrium growthrate, and the growth rate increases with the improvement of private production efficiency, public capital productionefficiency and the reduction of public capital congestion effect. The influence of habit-forming parameters on theequilibrium growth rate depends on the relative risk aversion coefficient. In the social arrangement economy, habitformation and public capital jointly determine the problem of multiple equilibrium, similarly, the increase of publiccapital congestion effect will also reduce the equilibrium economic growth rate.