This paper develops a simple model that can be used to estimate the effectiveness of Cohesion expenditure relative to similar but unsubsidized projects, thereby making it possible to explicitly test an important assumption that is often implicit in estimates of the impact of Cohesion policies....

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...