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Incentives and Social Norms in Household Behavior

  • Lindbeck, Assar

    ()

    (Institute for International Economic Studies, Stockholm University)

In a broad psychological perspective, both economic incentives and social norms may be be regarded as giving rise to purposesful, or “rational” behavior. By this I simply mean that individuals act in accordance with expected reward or punishment, even though the form these take differs substantially in the two cases. Whereas economic incentives imply “material rewards”, or favors that can be traded for such rewards including leisure, social norms imply “social rewards”. The latter basically take the form of approval or disapproval from others, and related feelings of pride or shame. Moreover, once a social norm has been internalized in an individual’s own value system, behavior in accordance with, or against, the norm will also result in feelings of self-respect or guilt. All this suggests that not only economic incentives but also social norms may be analyzed by means of utility theory, as will be illustrated below. Many social norms may not have much to do with economic incentives (Elster,1989). In some cases, it is, however, useful to study the interaction between them. Indeed, this is the basic message of the paper. My discussion will be limited to three norms of apparent importance for household behavior: (i) work norms; (ii) norms against wage underbidding; and (iii) saving and consumption norms. Thus, the paper deals with norms concerning willingness to work, ability to get a job and the use of income.

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Paper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 622.

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Length: 13 pages
Date of creation: 29 Oct 1997
Date of revision:
Handle: RePEc:hhs:iiessp:0622
Contact details of provider: Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
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Fax: +46-8-161443
Web page: http://www.iies.su.se/

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  1. Alessie, Rob & Kapteyn, Arie, 1991. "Habit Formation, Interdependent References and Demographic Effects in the Almost Ideal Demand System," Economic Journal, Royal Economic Society, vol. 101(406), pages 404-19, May.
  2. Kapteyn, Arie & Wansbeek, Tom, 1982. "Empirical evidence on preference formation," Journal of Economic Psychology, Elsevier, vol. 2(2), pages 137-154, June.
  3. Akerlof, George A, 1980. "A Theory of Social Custom, of Which Unemployment May be One Consequence," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 749-75, June.
  4. Lindbeck, A., 1994. "Welfare State Disincentives with Endogenous Habits and Norms," Papers 589, Stockholm - International Economic Studies.
  5. Pollak, Robert A, 1976. "Interdependent Preferences," American Economic Review, American Economic Association, vol. 66(3), pages 309-20, June.
  6. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-93, May.
  7. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
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