Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5062733 | Economics Letters | 2006 | 7 Pages |
Abstract
This paper shows that where there is habit formation in consumption and labour effort, output levels can be driven above or below those levels a social planner would choose depending on the relative size of these two habit effects. In the steady state of an economy where consumption habit persistence dominates, people work excessive hours compared with the social optimum. Some simple empirical evidence suggests that excessive output inefficiencies exist in both the US and the Euro-zone.
Keywords
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
M. Ali Choudhary, Paul Levine,