Hostname: page-component-7c8c6479df-24hb2 Total loading time: 0 Render date: 2024-03-27T08:32:52.132Z Has data issue: false hasContentIssue false

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

Published online by Cambridge University Press:  07 October 2004

ANGELO ANTOCI
Affiliation:
Dipartimento di Economia, Impresa e Regolamentazione, University of Sassari, via Sardegna 58, 07100 Sassari, Italy. E-mail: angelo.antoci@virgilio.it
STEFANO BARTOLINI
Affiliation:
Dipartimento di Economia Politica, University of Siena, Piazza. S. Francesco 7, 53100 Siena, Italy. E-mail: bartolinist@unisi.it

Abstract

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.

Type
Research Articles
Copyright
© 2004 Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

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