Revisiting the process of aggregate growth recovery after a capital destruction

We study the implications of a growth model including social capital and habit formation concerning recovery economies that suffer from an exogenous destruction in their stock. Habits exhibit very low persistence depend only on last period’s consumption as suggested by empirical evidence. In addition to physical capital, agents invest which generates both market (production) non-market (utility) returns. infinite horizon compare its with but without capital. Our framework is more efficient generating dynamic patterns replicate behavior main economic variables during reconstruction period. High investment at beginning transition key element our results.