Journal of Monetary Economics - Columbia University

The household cares about a composite good, a t, given by at ¼ Z 1 0 ðx itc Þ 1 1=Z di 1=ð1 1=ZÞ, ð2Þ where Z41 denotes the elasticity of substitution across different good varieties.Note that the utility of the household increases with the quality content of each good.

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