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Welfare Equivalent NNP and Habit Formation

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Author Info
Aronsson, Thomas () (Department of Economics, Umeå University)
Löfgren, Karl-Gustaf () (Department of Economics, Umeå University)
Abstract

This note concerns the importance of habit formation for social accounting. With internal habit formation, earlier procedures for welfare measurement in the first best apply with minor modifications. This result strengthens the idea behind using the comprehensive net national product as a welfare indicator. If, on the other hand, part of the habit formation is exogenous to each consumer, the exact welfare measure will also reflect the associated external effect.

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Publisher Info
Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 680.

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Length: 7 pages
Date of creation: 10 Apr 2006
Date of revision:
Handle: RePEc:hhs:umnees:0680

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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
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Related research
Keywords: Social accounting habit formation welfare

Find related papers by JEL classification:
D10 - Microeconomics - - Household Behavior - - - General
D60 - Microeconomics - - Welfare Economics - - - General
D62 - Microeconomics - - Welfare Economics - - - Externalities
I31 - Health, Education, and Welfare - - Welfare and Poverty - - - General Welfare

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  1. Alonso-Carrera, Jaime & Caballe, Jordi & Raurich, Xavier, 2005. "Growth, habit formation, and catching-up with the Joneses," European Economic Review, Elsevier, vol. 49(6), pages 1665-1691, August. [Downloadable!] (restricted)
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  2. Aronsson, Thomas & Lofgren, Karl-Gustaf, 1999. "Pollution tax design and 'Green' national accounting," European Economic Review, Elsevier, vol. 43(8), pages 1457-1474, August. [Downloadable!] (restricted)
  3. Raquel Carrasco & José M. Labeaga & J. David López-Salido, 2002. "Consumption And Habits: Evidence From Panel Data," Economics Working Papers we023415, Universidad Carlos III, Departamento de Economía. [Downloadable!]
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  4. Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June. [Downloadable!] (restricted)
  5. Weitzman, Martin L, 1976. "On the Welfare Significance of National Product in a Dynamic Economy," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 156-62, February. [Downloadable!] (restricted)
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