Substitution Effects in Intertemporal Problems

Quaderni - Working Paper DSE N° 1147

26 Pages Posted: 5 Jun 2020

See all articles by Davide Dragone

Davide Dragone

University of Bologna - Department of Economics

Paolo Vanin

University of Bologna - Department of Economics

Date Written: May 5, 2020

Abstract

We consider a broad class of intertemporal economic problems and we characterize the short and long-run response 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 sign in the short and in the long run.

Keywords: Intertemporal substitution, price elasticity, tax reforms

JEL Classification: D11, D91, I00

Suggested Citation

Dragone, Davide and Vanin, Paolo, Substitution Effects in Intertemporal Problems (May 5, 2020). Quaderni - Working Paper DSE N° 1147, Available at SSRN: https://ssrn.com/abstract=3596124 or http://dx.doi.org/10.2139/ssrn.3596124

Davide Dragone (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy
0039.051.2098880 (Phone)

HOME PAGE: http://https://www.unibo.it/sitoweb/davide.dragone/en

Paolo Vanin

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, BO 40126
Italy
+39-0512098120 (Phone)
+39-0512098040 (Fax)

HOME PAGE: http://https://sites.google.com/site/paolovanin/

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