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OUR ECONOMY

External Habits Formation and the Environment

Fatma Safi

Abstract


The present paper presents a standard overlapping generations model with
external habits formation and environmental quality in the utility function. Our
main objective is to study the impact of external habits on capital accumulation
and environmental quality on the intertemporal competitive equilibrium.
We notice that striving for status leads to environment worsening and capital
increasing when the cohort size is large.


Keywords


external habits, overlapping generations, environmental quality

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