Habit formation and the pareto-efficient provision of public goods

Thomas Aronsson () and Ronnie Schöb ()
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Thomas Aronsson: Umeå University
Ronnie Schöb: Freie Universität Berlin
Authors registered in the RePEc Author Service: Ronnie Schoeb

Social Choice and Welfare, 2022, vol. 59, issue 3, No 6, 669-681

Abstract: Abstract This paper examines the implications of habit formation in private and public goods consumption for the Pareto-efficient provision of public goods, based on a two-period model with nonlinear taxation. Under weak leisure separability, and if the public good is a flow-variable such that the government directly decides on the level of the public good in each period, habit formation leads to a modification of the policy rule for public good provision if, and only if, the degrees of habituation differ for private and public good consumption. By contrast, if the public good supply is time-invariant, the presence of habit formation generally alters the policy rule for public good provision.

Date: 2022
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Working Paper: Habit Formation and the Pareto-Efficient Provision of Public Goods (2017)
Working Paper: Habit formation and the Pareto-efficient provision of public goods (2017)
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DOI: 10.1007/s00355-022-01401-x

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