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Will the consumption externalities' effects in the Ramsey model please stand up?

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  • Wendner, Ronald

Abstract

According to the prior literature, in a Ramsey model, consumption externalities have no impact on steady state behavior, once labor supply is exogenous. In contrast, this paper argues that -- in the presence of technical change -- consumption externalities always affect steady state behavior, via their impact on the elasticity of marginal utility of consumption.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 111 (2011)
Issue (Month): 3 (June)
Pages: 210-212

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Handle: RePEc:eee:ecolet:v:111:y:2011:i:3:p:210-212

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Web page: http://www.elsevier.com/locate/ecolet

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Keywords: Consumption externality Keeping up with the Joneses Ramsey model Intertemporal elasticity of substitution;

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  1. Stephen J Turnovsky & Goncalo Monteiro, . "Consumption Externalities, Production Externalities and Efficient Capital Accumulation under Time Non-separable Preferences," Discussion Papers 05/08, Department of Economics, University of York.
  2. Michael Rauscher, 1997. "Conspicuous consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 66(1), pages 35-42, February.
  3. Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen J. Turnovsky, 2004. "Habit Formation, Catching Up with the Joneses, and Economic Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 47-80, 03.
  4. Walter Fisher & Franz Hof, 2000. "Relative consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 72(3), pages 241-262, October.
  5. Liu, Wen-Fang & Turnovsky, Stephen J., 2005. "Consumption externalities, production externalities, and long-run macroeconomic efficiency," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 1097-1129, June.
  6. Bill Dupor & Wen-Fang Liu, 2003. "Jealousy and Equilibrium Overconsumption," American Economic Review, American Economic Association, vol. 93(1), pages 423-428, March.
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Cited by:
  1. Johansson-Stenman, Olof & Sterner, Thomas, 2013. "Discounting and Relative Consumption," Working Papers in Economics 559, University of Gothenburg, Department of Economics.
  2. Aronsson, Thomas & Johansson-Stenman, Olof, 2013. "Publicly Provided Private Goods and Optimal Taxation when Consumers Have Positional Preferences," Working Papers in Economics 558, University of Gothenburg, Department of Economics.
  3. Aronsson, Thomas & Johansson-Stenman, Olof, 2012. "When Samuelson met Veblen abroad: National and global public good provision when social comparisons matter," Working Papers in Economics 538, University of Gothenburg, Department of Economics.
  4. Aronsson, Thomas & Johansson-Stenman, Olof, 2010. "Veblen’s Theory of the Leisure Class Revisited: Implications for Optimal Income Taxation," Working Papers in Economics 466, University of Gothenburg, Department of Economics.
  5. Goncalo Monteiro & Stephen Turnovsky, 2013. "Anticipated Consumption and its Impact on Capital Accumulation and Growth: 'Forward-Looking' vs. 'Backward-Looking' Consumption Reference," CESifo Working Paper Series 4536, CESifo Group Munich.
  6. Thomas Aronsson & Olof Johansson-Stenman, 2013. "Veblen’s theory of the leisure class revisited: implications for optimal income taxation," Social Choice and Welfare, Springer, vol. 41(3), pages 551-578, September.

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