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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26396
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| Title: | | Habit formation and labor supply  |
| Authors: | | Cremer, Helmuth de Donder, Philippe Maldonado, Darío Pestieau, Pierre |
| Issue Date: | | 2008 |
| Series/Report no.: | | CESifo working paper 2351 |
| Abstract: | | This paper shows that the combination of habit formation - present consumption creating additional consumption needs in the future - and myopia may explain why some retirees are forced to unretire, i.e., unexpectedly return to work. It also shows that when myopia about habit formation leads to unretirement there is a case for government's intervention. In a first-best setting the optimal solution can be decentralized by a simple Pigouvian (paternalistic) consumption tax (along with suitable lump-sum taxes). In a second-best setting, when personalized lump-sum transfers are not available, consumption taxes may have conflicting paternalistic and redistributive effects. We study the design of consumption taxes in such a setting when myopic individuals differ in productivity. |
| Subjects: | | Habit formation myopia unretiring |
| JEL: | | D91 H21 H55 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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