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Long-run welfare under externalities in consumption, leisure, and production: A case for happy degrowth vs. unhappy growth

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  • Bilancini, Ennio
  • D'Alessandro, Simone

Abstract

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 choices without considering their external effects, a planned economy where a myopic planner fails to recognize both leisure and consumption externalities but recognizes production externalities, and a planned economy with a fully informed planner. We first compare the balanced growth paths under the three regimes and then we numerically investigate the transition to the optimal balanced growth path. We provide a number of findings. First, in a decentralized economy growth or labor (or both) are greater than in the regime with a fully informed planner, and hence are sub-optimal from a welfare standpoint. Second, a myopic intervention which overlooks consumption and leisure externalities leads to more growth and labor than in both the decentralized and the fully informed regime. Third, we provide a case for happy degrowth: a transition to the optimal balanced growth path that is associated with downscaling of production, a reduction in private consumption, and an ongoing increase in leisure and well-being.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 84 (2012)
Issue (Month): C ()
Pages: 194-205

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Handle: RePEc:eee:ecolec:v:84:y:2012:i:c:p:194-205

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Web page: http://www.elsevier.com/locate/ecolecon

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Keywords: Degrowth; Endogenous growth; Consumption externalities; Leisure externalities; Production externalities;

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Cited by:
  1. Prof. Dr. Bernd Meyer & Gerd Ahlert & Roland Zieschank & Prof. Dr. Hans Diefenbacher, 2012. "Synopse aktuell diskutierter Wohlfahrtsansätze und grüner Wachstumskonzepte und grüner Wachstumskonzepte Synopse aktuell diskutierter Wohlfahrtsansätze und grüner Wachstumskonzepte," GWS Discussion Paper Series, GWS - Institute of Economic Structures Research 12-4, GWS - Institute of Economic Structures Research.
  2. Antoci, Angelo & Sodini, Mauro & Zarri, Luca, 2012. "Relational consumption and nonlinear dynamics in an overlapping generations model," AICCON Working Papers, Associazione Italiana per la Cultura della Cooperazione e del Non Profit 103-2012, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
  3. Stefano Bartolini & Ennio Bilancini & Francesco Sarracino, 2011. "Predicting the Trend of Well-Being in Germany: How Much Do Comparisons, Adaptation and Sociability Matter?," SOEPpapers on Multidisciplinary Panel Data Research 414, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Vincenzo Lombardo, 2012. "Relative consumption and poverty traps," Discussion Papers, CRISEI, University of Naples "Parthenope", Italy 11_2012, CRISEI, University of Naples "Parthenope", Italy.
  5. Becchetti, Leonardo & Pelloni , Alessandra, 2010. "What are we learning from the life satisfaction literature?," AICCON Working Papers, Associazione Italiana per la Cultura della Cooperazione e del Non Profit 76-2010, Associazione Italiana per la Cultura della Cooperazione e del Non Profit.
  6. Gerd Ahlert & Prof. Dr. Bernd Meyer & Roland Zieschank & Prof. Dr. Hans Diefenbacher & Prof. Dr. Hans G. Nutzinger, 2013. "Synopsis of Approaches to Welfare and of Green Growth Concepts Currently under Discussion," GWS Discussion Paper Series, GWS - Institute of Economic Structures Research 13-1, GWS - Institute of Economic Structures Research.
  7. Vincenzo Lombardo, 2013. "Relative consumption and human capital accumulation," Economics Bulletin, AccessEcon, vol. 33(2), pages 1091-1100.
  8. Bernardo, Giovanni & D'Alessandro, Simone, 2014. "Transition to sustainability? Feasible scenarios towards a low-carbon economy," MPRA Paper 53746, University Library of Munich, Germany.

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