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| Author: | Gombi, I. Ikeda, S. |
| Title: | Habit formation and the transfer paradox |
| Journal: | Japanese Economic Review
2003 : DEC, VOL. 54:4, p. 361-380 |
| Index terms: | Consumer behaviour Transfer payments |
| Language: | eng |
| Abstract: | This paper shows that the transfer paradox can occur in a free-trade, dynamically stable economy by using a two-country model with habit-forming consumers. When the debtor is more in the habit of consuming than the creditor, an income transfer from the creditor to the debtor raises the interest rate in transition through changes in time preference. |
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