Substitution Effects in Intertemporal Problems
- (pp. 791-809)
Abstract
We consider a broad class of intertemporal economic problems and characterize the short-run and long-run responses of the demand for a good to a permanent increase in its market price. Depending on the interplay between self-productivity and time discounting, we show that dynamic substitution effects can generate price elasticities of opposite signs in the short run and in the long run.Citation
Dragone, Davide, and Paolo Vanin. 2022. "Substitution Effects in Intertemporal Problems." American Economic Journal: Microeconomics, 14 (3): 791-809. DOI: 10.1257/mic.20200121Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- H20 Taxation, Subsidies, and Revenue: General
- J22 Time Allocation and Labor Supply
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
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