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Welfare Equivalent NNP and Habit Formation

Author

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  • Aronsson, Thomas

    (Department of Economics, Umeå University)

  • Löfgren, Karl-Gustaf

    (Department of Economics, Umeå University)

Abstract

This note concerns the importance of habit formation for social accounting. With internal habit formation, earlier procedures for welfare measurement in the first best apply with minor modifications. This result strengthens the idea behind using the comprehensive net national product as a welfare indicator. If, on the other hand, part of the habit formation is exogenous to each consumer, the exact welfare measure will also reflect the associated external effect.

Suggested Citation

  • Aronsson, Thomas & Löfgren, Karl-Gustaf, 2006. "Welfare Equivalent NNP and Habit Formation," Umeå Economic Studies 680, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0680
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    References listed on IDEAS

    as
    1. Alonso-Carrera, Jaime & Caballe, Jordi & Raurich, Xavier, 2005. "Growth, habit formation, and catching-up with the Joneses," European Economic Review, Elsevier, vol. 49(6), pages 1665-1691, August.
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    More about this item

    Keywords

    Social accounting; habit formation; welfare;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D60 - Microeconomics - - Welfare Economics - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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