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Consumption Externalities, Habit Formation and Equilibrium Efficiency Author info | Abstract | Publisher info | Download info | Related research | Statistics Jaime Alonso-Carrera
Jordi Caballé
Xavier Raurich
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We analyze the welfare properties of the competitive equilibrium in a capital accumulation model where individual preferences are subject to both habit formation and consumption spillovers. Using an additive specification for preferences, according to which the argument in the utility function is a linear combination of present and past values of own consumption and consumption spillovers, we analyze the circumstances under which these spillovers are a source of inefficiency. It is shown that consumption externalities have to interact with habits in order to generate an inefficient dynamic equilibrium. Finally, we characterize optimal tax policies aimed at restoring efficient decentralized paths. Copyright The editors of the "Scandinavian Journal of Economics", 2004 .
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Article provided by Blackwell Publishing in its journal The Scandinavian Journal of Economics .
Volume (Year): 106 (2004)
Issue (Month): 2 (06)
Pages: 231-251
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Handle: RePEc:bla:scandj:v:106:y:2004:i:2:p:231-251Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=0347-0520
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.: John Y. Campbell & John H. Cochrane, 1994.
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Full
references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
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"Growth, Habit Formation, and Catching-up\ with the Joneses ,"
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497.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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Other versions:
Alonso-Carrera, Jaime & Caballe, Jordi & Raurich, Xavier, 2005.
"Growth, habit formation, and catching-up with the Joneses ,"
European Economic Review ,
Elsevier, vol. 49(6), pages 1665-1691, August.
[Downloadable!] (restricted) Andersson, Fredrik W., 2006.
"Consumption Theory with Reference Dependent Utility ,"
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