Consumption Externalities, Habit Formation, and Equilibrium Efficiency

Jaime Alonso-Carrera (), Jordi Caballe () and Xavier Raurich ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We analyze the welfare properties of the competitive equilibrium in a capital accumulation model where individual preferences are subjected to both habit formation and consumption spillovers. We also discuss how consumption externalities and habits interact to generate an inefficient dynamic equilibrium. Finally, we characterize optimal tax policies aimed to restore efficient decentralized paths.

Keywords: Habit Formation; Consumption Externalities; Equilibrium Efficiency (search for similar items in EconPapers)
JEL-codes: D91 E62 O40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mic
Date: 2001-10-05
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Journal Article: Consumption Externalities, Habit Formation and Equilibrium Efficiency (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:aub:autbar:499.01

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