We consider an economy where individuals use their standard of living based on past consumption in order to evaluate the utility arising from current consumption. We analyse how this process of preference formation affects the bequest motive. We show that habits (based on one's own past...

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...

We analyze the transitional dynamics of an endogenous growth model with heterogeneous consumption goods. In this model, convergence is driven by two different forces: the diminishing returns to capital and the growth of the relative price between physical and human capital. Because this second...

We analyze the transitional dynamics of a model with heterogeneous consumption goods. In this model, convergence is driven by two different forces: the typical diminishing returns to capital and the sectoral change inducing the variation in relative prices. We show that this second force a¤ects...

We analyze the welfare properties of the competitive equilibrium in a capital accumulation model where individual preferences are subject to both habit formation and consumption spillovers. Using an additive specification for preferences, according to which the argument in the utility function...

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...

We study how the introduction of consumption externalities affects the efficiency of the dynamic equilibrium in an economy displaying dynastic altruism. When the bequest motive is inoperative consumption externalities affect the intertemporal margin between young and old consumption and thus...

In this paper, we show that consumption externalities are a source of equilibrium indeterminacy in a growth model with endogenous labor supply. In particular, when the marginal rate of substitution between own consumption and the others' consumption is constant along the equilibrium path, the...

We analyze how the presence of endogenous preferences affects the altruistic bequest motive from parents to children. We will show that the existence of habits raises the threshold value of the intergenerational discount factor above which altruistic bequests are positive, while aspiration...