TY - JOUR
T1 - Welfare implications of the interaction between habits and consumption externalities
AU - Alonso-Carrera, Jaime
AU - Cabalié, Jordi
AU - Raurich, Xavier
PY - 2006/5/1
Y1 - 2006/5/1
N2 - We analyze the welfare properties of the equilibrium path of a growth model where both habits and consumption externalities affect the utility of consumers. Our analysis highlights the crucial role played by complementarities between externalities and habits in order to generate an inefficient dynamic equilibrium. In particular, we show that the competitive equilibrium is inefficient when consumption externalities and habit-adjusted consumption are not perfect substitutes.
AB - We analyze the welfare properties of the equilibrium path of a growth model where both habits and consumption externalities affect the utility of consumers. Our analysis highlights the crucial role played by complementarities between externalities and habits in order to generate an inefficient dynamic equilibrium. In particular, we show that the competitive equilibrium is inefficient when consumption externalities and habit-adjusted consumption are not perfect substitutes.
U2 - https://doi.org/10.1111/j.1468-2354.2006.00388.x
DO - https://doi.org/10.1111/j.1468-2354.2006.00388.x
M3 - Article
VL - 47
SP - 557
EP - 571
JO - International Economic Review
JF - International Economic Review
SN - 0020-6598
ER -