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Too slow a change? Deep habits, consumption shifts and transitory tax


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Title: Too slow a change? Deep habits, consumption shifts and transitory tax
Authors: van den Bijgaart, I.M.
Issue Date: Jun-2017
Extent: 52
Publication type: report
Organization: Dept. of Economics, University of Gothenburg
Series/Report no.: Working Papers in Economics
701
Keywords: habit formation
projection bias
consumption shifts
optimal taxation
Abstract: This paper studies shifts in the consumption bundle when consumption is subject to habit formation, and consumers do not internalize this habit formation process. Habits are goodspecific, or ’deep’, and cause persistence in good-specific consumption. In addition, at the aggregate level, habits act as benchmark against which consumption is evaluated. I establish that a rapid transition is optimal if the persistence effect is relatively strong, and determine the path of taxes or subsidies that i... more
ISSN: 1403-2465
Description: JEL: D11, D62, H21, H23
URI: http://hdl.handle.net/2077/52586
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