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...

We analyze the dynamic behavior and the welfare properties of the equilibrium path of a growth model where both habits and consumption externalities affect the utility of consumers. We discuss the effects of flat rate income taxes and characterize the optimal income taxation policy. We show...