Habit formation and the pareto-efficient provision of public goods

Abstract This paper examines the implications of habit formation in private and public goods consumption for Pareto-efficient provision goods, based on a two-period model with nonlinear taxation. Under weak leisure separability, if good is flow-variable such that government directly decides level each period, leads to modification policy rule if, only degrees habituation differ consumption. By contrast, supply time-invariant, presence generally alters provision.