Reconciling Jaimovich–Rebello preferences, habit in consumption and labor supply

TLDR: In this paper, a form of a utility function of consumption with habit and leisure that is compatible with long-run balanced growth, hits a steady state observed target for hours worked, and is consistent with micro-econometric evidence for the inter-temporal elasticity of substitution and the Frisch elasticity was studied.

About: This article is published in Economics Letters.The article was published on 2018-04-25 and is currently open access. It has received 2 citations till now. The article focuses on the topics: Frisch elasticity of labor supply & Elasticity of substitution.

Figures

Table 1: Lower Bound δJR(ψ) with Habit and Constraints on JR Preferences

Figure 1: Frisch Elasticity: Generalized JR Utility, Internal Habit and a Labor Wedge.

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This note studies two forms of a utility function of consumption with habit and leisure that are ( a ) compatible with long-run balanced growth, ( b ) hit a steady state observed target for hours worked and ( c ) are consistent with micro-econometric evidence for the inter-temporal elasticity of substitution and the Frisch elasticity of labor supply. In Theorem 3 the authors propose a generalized JR utility function that in conjunction with a labor wedge solves the problem.