The interaction between habit formation and pollution-type ex- ternalities modifies the social optimum through discount …

The interaction between habit formation and pollution-type ex- ternalities modifies the social optimum through discount …

We analyze an overlapping generations model in which pollution arises, in an accumulative way, from production …. Households do not care directly about the environment, however pollution makes them incur health costs when they are elderly. We … show that the presence of pollution makes the economy more likely to be dynamically inefficient. For these cases we analyze …

This paper quantifies the welfare cost of consumption externalities in an endogenous growth model with habit formation … past consumption. Although utility may be lower in the presence of consumption externalities, the welfare loss relative to …