This paper considers the implications of consumption and borrowing externalities in a small open economy framework. The former reflect the assumption that status conscious agents care about the relative consumption of imported goods, while the latter arise because agents do not take into account...

The paper considersan industry where the effects of pollution can be off-set by investing in adaption as a private good. The focus is not on external effects, but on economies of scale that are introducted when the costs of adapting to pollution are independent from the quantity produced. The...