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Long-run welfare under externalities in consumption, leisure, and production: A case for happy degrowth vs. unhappy growth

Bilancini, Ennio and D'Alessandro, Simone Long-run welfare under externalities in consumption, leisure, and production: A case for happy degrowth vs. unhappy growth. Ecological Economics, 84. pp. 194-205. ISSN 0921-8009 (2012)

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Abstract

In this paper we contribute to the debate on the relationship between growth and well-being by examining an endogenous growth model where we allow for externalities in consumption, leisure, and production. We analyze three regimes: a decentralized economy where each household makes isolated choices without considering their external effects, a planned economy where a myopic planner fails to recognize both leisure and consumption externalities but recognizes production externalities, and a planned economy with a fully informed planner. We first compare the balanced growth paths under the three regimes and then we numerically investigate the transition to the optimal balanced growth path. We provide a number of findings. First, in a decentralized economy growth or labor (or both) are greater than in the regime with a fully informed planner, and hence are sub-optimal from a welfare standpoint. Second, a myopic intervention which overlooks consumption and leisure externalities leads to more growth and labor than in both the decentralized and the fully informed regime. Third, we provide a case for happy degrowth: a transition to the optimal balanced growth path that is associated with downscaling of production, a reduction in private consumption, and an ongoing increase in leisure and well-being.

Item Type: Article
Identification Number: 10.1016/j.ecolecon.2011.10.023
Uncontrolled Keywords: Degrowth; Endogenous growth; Consumption externalities; Leisure externalities; Production externalities
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
Research Area: Economics and Institutional Change
Depositing User: Caterina Tangheroni
Date Deposited: 24 Jan 2018 11:27
Last Modified: 24 Jan 2018 11:27
URI: http://eprints.imtlucca.it/id/eprint/3879

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