We analyze the welfare properties of the equilibrium path of a growth model where both habits and consumption externalities affect the utility of consumers. Our analysis highlights the crucial role played by complementarities between externalities and habits in order to generate an inefficient...

The bounded core is the set of allocations that are not improved upon by any bounded set of agents. The authors submit that the bounded core does not serve as a criterion for the efficiency of allocations in an overlapping generations economy, for it may include allocations that are not even...