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Welfare State Disincentives with Endogenous Habits and Norms

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  • Lindbeck, Assar

    (Research Institute of Industrial Economics (IFN))

Abstract

It is assumed in this paper that habits and social norms constrain the influence of economic disincentives on individual behavior but that these constraints themselves may subsequently be influenced by the very same disincentives. It is also assumed that an individual is more likely to obey such habits and norms if many individuals in society do so. Though such constraints on economic behavior usually recede only gradually in response to changes in economic incentives, it is argued that major macroeconomic shocks may drastically speed up the process (a 'ketchup effect'). These features may generate multiple equilibria and vicious dynamics. Copyright 1995 by The editors of the Scandinavian Journal of Economics.
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Suggested Citation

  • Lindbeck, Assar, 1995. "Welfare State Disincentives with Endogenous Habits and Norms," Working Paper Series 441, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:0441
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    References listed on IDEAS

    as
    1. Axelrod, Robert, 1986. "An Evolutionary Approach to Norms," American Political Science Review, Cambridge University Press, vol. 80(4), pages 1095-1111, December.
    2. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
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    4. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 749-775.
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    6. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-319, June.
    7. repec:bla:kyklos:v:32:y:1979:i:4:p:775-801 is not listed on IDEAS
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    More about this item

    Keywords

    Welfare state; Behavior;

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D60 - Microeconomics - - Welfare Economics - - - General

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