Welfare Equivalent NNP and Habit Formation

Thomas Aronsson () and Karl-Gustaf Löfgren ()
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Thomas Aronsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Karl-Gustaf Löfgren: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 680, Umeå Economic Studies from Umeå University, Department of Economics

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.

Keywords: Social accounting; habit formation; welfare (search for similar items in EconPapers)
JEL-codes: D10 D60 D62 I31 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2006-04-10
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