The welfare cost of external habits: a quantitat ive assessment
This paper quantifies the welfare cost of consumption externalities in an endogenous growth model with habit formation. Agent’s utility depends on both current consumption and a reference consumption level determined by economy-wide average past consumption. Although utility may be lower in the pres...
| Main Author: | |
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| Format: | Article |
| Language: | English |
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Universidad de Chile
2016-04-01
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| Series: | Estudios de Economía |
| Online Access: | https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/40120 |
| _version_ | 1818174560696008704 |
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| author | Manuel A. Gómez |
| author_facet | Manuel A. Gómez |
| author_sort | Manuel A. Gómez |
| collection | DOAJ |
| description | This paper quantifies the welfare cost of consumption externalities in an endogenous growth model with habit formation. Agent’s utility depends on both current consumption and a reference consumption level determined by economy-wide average past consumption. Although utility may be lower in the presence of consumption externalities, the welfare loss relative to the efficient growth path is found to be very small. This result is extremely robust to variations in the parameter values. However, there are relatively important differences in the timing of the welfare loss and in generational welfare. |
| first_indexed | 2024-12-11T19:46:21Z |
| format | Article |
| id | doaj.art-907e0df2532f4e90bd92467ea06470aa |
| institution | Directory Open Access Journal |
| issn | 0304-2758 0718-5286 |
| language | English |
| last_indexed | 2024-12-11T19:46:21Z |
| publishDate | 2016-04-01 |
| publisher | Universidad de Chile |
| record_format | Article |
| series | Estudios de Economía |
| spelling | doaj.art-907e0df2532f4e90bd92467ea06470aa2022-12-22T00:52:53ZengUniversidad de ChileEstudios de Economía0304-27580718-52862016-04-0137152640120The welfare cost of external habits: a quantitat ive assessmentManuel A. Gómez0Facultad de Ciencias Económicas y Empresariales, Universidad de A Coruña. Campus de Elviña, 15071 A CoruñaThis paper quantifies the welfare cost of consumption externalities in an endogenous growth model with habit formation. Agent’s utility depends on both current consumption and a reference consumption level determined by economy-wide average past consumption. Although utility may be lower in the presence of consumption externalities, the welfare loss relative to the efficient growth path is found to be very small. This result is extremely robust to variations in the parameter values. However, there are relatively important differences in the timing of the welfare loss and in generational welfare.https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/40120 |
| spellingShingle | Manuel A. Gómez The welfare cost of external habits: a quantitat ive assessment Estudios de Economía |
| title | The welfare cost of external habits: a quantitat ive assessment |
| title_full | The welfare cost of external habits: a quantitat ive assessment |
| title_fullStr | The welfare cost of external habits: a quantitat ive assessment |
| title_full_unstemmed | The welfare cost of external habits: a quantitat ive assessment |
| title_short | The welfare cost of external habits: a quantitat ive assessment |
| title_sort | welfare cost of external habits a quantitat ive assessment |
| url | https://estudiosdeeconomia.uchile.cl/index.php/EDE/article/view/40120 |
| work_keys_str_mv | AT manuelagomez thewelfarecostofexternalhabitsaquantitativeassessment AT manuelagomez welfarecostofexternalhabitsaquantitativeassessment |