The economic analysis of global warming is dominated by models based on optimal growth theory. This approach can generate biases in the presence of positional goods and status effects. We show that by ignoring these direct consumption externalities, integrated assessment models overestimate the...

In this paper we contribute to the debate on the relationship between growth and well-being by examining an endogenous growth model where we allow for externalities in consumption, leisure, and production. We analyze three regimes: a decentralized economy where each household makes isolated...

In this paper we contribute to the debate on the relationship between growth and well-being by examining an endogenous growth model where we allow for externalities in consumption, leisure, and production. We analyze three regimes: a decentralized economy where each household makes isolated...

We study structural change in a simple, two-sector endogenous growth model and show that the presence of commodity-specific consumption externalities can be a source of structural change. When the degrees of consumption externalities are different between different goods, the two sectors grow at...

One-sector neoclassical growth models reveal that consumption externalities lead to inefficient allocation in a steady state and indeterminate equilibrium toward the steady state only if there is a labor-leisure tradeoff. This paper shows that in a two-sector neoclassical growth model, even...

We study the testability implications of public versus private consumption. The distinguishing feature of our approach is that we start from a revealed preference characterization of collectively rational behavior. Remarkably, we find that assumptions regarding the public or private nature of...

It has conventionally been argued that trade liberalization will degrade the environment of a country that imports a good whose consumption gives rise to pollution. By contrast, this note demonstrates that, if the linkage between the trade and the environmental policies has been taken into...

We study the impact of redistributive policies when agents can signal their social status by spending on a conspicuous good. Our focus is on how the shape of the status function – i.e., how social status is computed and evaluated – can affect the equilibrium outcome of the model, and in...

Counterfeiting of trademarked products is an increasing problem in national and international trade. We contribute to the analysis of how counterfeiting affects markets by extending the work of Grossman and Shapiro (1988a) on consumption externalities in prestige good markets. We model a general...

In one-sector neoclassical growth models, consumption externalities lead to an inefficient allocation in a steady state and indeterminate equilibrium toward a steady state only if there is a labor-leisure tradeoff. This paper shows that in a two-sector neoclassical growth model, even without a...