Welfare State Disincentives with Endogenous Habits and Norms
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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- Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
- Elster, Jon, 1989. "Social Norms and Economic Theory," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 99-117, Fall.
- Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
- Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
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