In markets where production has adverse externalities, policy makers may wish to increase welfare by imposing a cap on … market entries. In this paper, we examine the implications that the cap has on the firms' investment equilibrium policy and … consideration of the option value triggers investment at price above the social marginal cost of production, then it is optimal to …

investment. We show that this phenomenon, well-known in the case of production caps, also applies to taxes, and occurs whether … change affects all firms. Runs accelerate investment compared with the socially optimal path, lowering welfare, and can be …

allocation with a limited commitment environment and find positive externality costs of capital investment provided that full-risk …We study externality costs of capital investment under limited commitment. We solve for the constrained efficient …-sharing is not feasible. In a decentralized version of limited commitment environment, a one unit increase of capital investment …

-linked externalities (JLEs). JLEs emerge when wages exceed the opportunity cost of labor (labor externalities), or when there are social … gains from creating better jobs for some classes of worker, such as women or youth (social externalities). Like all … externalities, JLEs create a gap between private and social rates of return. Investments can be socially profitable (once the …

cannot buy happiness? I argue that the solution to this 'paradox of happiness' can be provided by including in the theory a … tertium movens of growth: negative externalities. These externalities can be of two kinds. The first are positional … externalities, i.e. those due the fact that individuals may be interested in relative not absolute position. The second kind of …