Habit formation and dependency in the welfare state Jakee, Keith Sun, Guang-Zhen 10.4225/03/59378dd444ab7 https://bridges.monash.edu/articles/journal_contribution/Habit_formation_and_dependency_in_the_welfare_state/5085235 External habit formation explains why welfare states can be expected to exhibit increasing dependency over time through increases in the share of the population receiving welfare transfers, while the average number of hours worked decreases. Under plausible parameter values, the rate of taxation (and also the welfare expenditure share of national income) monotonically increases over time and asymptotically approaches a steady state. A positive interactive feedback loop between slow-moving external habits and welfare policies makes the extent of redistribution a "moving target". Consequently, setting arbitrary redistributive goals may never satisfy redistributional demands in future periods. At the same time, technological progress may mask the underlying dynamic effects of the welfare state. 2017-06-07 05:23:30 Welfare state dynamics Social norms monash:2212 External habit formation 1959.1/2212 Government growth 2004 Redistribution