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Habits and Time Preference


  • Shi, Shouyong
  • Epstein, Larry G


This paper proposes a utility function incorporating both habit formation and an endogenous rate of time preference in a manner consistent with the intuition of Irving Fisher regarding the influence of past consumption on impatience. It is shown that the ne w specification is tractable and generates new predictions in the cont ext of three model economies: (1) a closed economy with heterogeneous agents, (2) a small open economy with one traded good and one nontra ded good, and (3) a small open economy with a traded good and domestic money. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Shi, Shouyong & Epstein, Larry G, 1993. "Habits and Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 61-84, February.
  • Handle: RePEc:ier:iecrev:v:34:y:1993:i:1:p:61-84

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    References listed on IDEAS

    1. Alan L. Gustman & Thomas L. Steinmeier, 1984. "Partial Retirement and the Analysis of Retirement Behavior," ILR Review, Cornell University, ILR School, vol. 37(3), pages 403-415, April.
    2. Lundberg, Shelly J, 1985. "Tied Wage-Hours Offers and the Endogeneity of Wages," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 405-410, August.
    3. Moffitt, Robert, 1982. "The Tobit Model, Hours of Work and Institutional Constraints," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 510-515, August.
    4. Rosen, Harvey S, 1976. "Taxes in a Labor Supply Model with Joint Wage-Hours Determination," Econometrica, Econometric Society, vol. 44(3), pages 485-507, May.
    5. Deaton, Angus & Meullbauer, John, 1981. "Functional Forms for Labor Supply and Commodity Demands with and without Quantity Restrictions," Econometrica, Econometric Society, vol. 49(6), pages 1521-1532, November.
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