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Variety-Controlling Public Policy Under Addiction and Saturation

Author

Listed:
  • Nobuko Serizawa

    (Niigata University)

  • Shigeru Wakita

    (Tokyo Metropolitan University)

Abstract

This paper constructs a tractable general equilibrium model for investigating the dissimilar effects of addiction and saturation on consumption and public policy. By introducing an industry-specific intertemporal consumption externality, we provide clear analytical results that a lump-sum subsidy for firms can increase welfare in the presence of a negative externality (saturation). A tax can accomplish the same given a positive externality (addiction). Unlike existing studies of cultural goods, these results are not based on assumptions concerning exogenous different preferences across groups, but rather on conventional monopolistic competition and consumption habit formation models in macroeconomics.

Suggested Citation

  • Nobuko Serizawa & Shigeru Wakita, 2016. "Variety-Controlling Public Policy Under Addiction and Saturation," The Japanese Economic Review, Springer, vol. 67(1), pages 125-140, March.
    • Handle: RePEc:spr:jecrev:v:67:y:2016:i:1:d:10.1111_jere.12075
    DOI: 10.1111/jere.12075
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    References listed on IDEAS

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    More about this item

    Keywords

    F12; F13; H20; Z10;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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