Skip to main content Accessibility help

Negative externalities, defensive expenditures and labour supply in an evolutionary context



In this model, well-being depends on leisure, on an environmental renewable resource, and on a non-storable output, which can substitute for the environmental resource or can satisfy needs different from those satisfied by the resource. Individuals have free access to the environmental resource, which is subject to negative externalities: that is, is depleted by the production and consumption of the output. Individuals react to negative externalities by increasing their labour supply in order to produce substitutes for the diminishing resource. The increase in production and consumption that ensues generates further deterioration of the future quality or quantity of the free resource, thus giving rise to a self-reinforcing process. Multiple equilibria and ‘critical mass effects’ are consistent with the functioning of this economy and the resulting level of aggregate production may be higher than is socially desirable.



Hide All
We are especially indebted for their comments to A. Leijonhufvud, R. Lopez, U. Pagano, L. Punzo, and three anonymous referees. The usual caveats apply.



Full text views

Total number of HTML views: 0
Total number of PDF views: 0 *
Loading metrics...

Abstract views

Total abstract views: 0 *
Loading metrics...

* Views captured on Cambridge Core between <date>. This data will be updated every 24 hours.

Usage data cannot currently be displayed