Pollution, Leisure and Local Indeterminacy
While the literature mainly focuses on pollution emissions originating from production or consumption, the present paper aims, in light of recent empirical evidence, to study competitive equilibrium when pollution originates from leisure-related consumption. To this end, we develop a simple competit...
Enregistré dans:
| Auteurs principaux: | , |
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| Format: | Article ou chapitre numérique |
| Langue: | Français |
| Publié: |
2026
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| Sujets: | |
| Accès en ligne: | Accès Université d'Orléans et IFPM Accès Université d'Orléans et IFPM |
| Résumé: | While the literature mainly focuses on pollution emissions originating from production
or consumption, the present paper aims, in light of recent empirical evidence, to study
competitive equilibrium when pollution originates from leisure-related consumption. To
this end, we develop a simple competitive Ramsey-Cass-Koopmans economy with
endogenous labour supply, in which a pollution externality, viewed as a pure flow, is
generated jointly by leisure and consumption through a complementary relationship.
Moreover, pollution affects the economy by reducing both household utility and the
marginal utility of consumption (i.e., the so-called distaste effect). This simple framework generates several interesting results. In particular, we show that when pollution
originates solely from consumption, the economy possesses a unique steady state that
is saddle-path stable. By contrast, when pollution is jointly generated by consumption
and leisure, two steady states coexist: a leisure-intensive one and a labour-intensive
one. The former is locally saddle-path stable, whereas the latter is locally indeterminate. This result contrasts with the existing literature, since local indeterminacy traditionally arises from a positive effect of pollution on the marginal utility of consumption
(the so-called compensation effect). |
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