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Leisure externalities: Implications for growth and welfare

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  • Pintea, Mihaela I.

Abstract

This paper develops a neoclassical growth model with leisure externalities. Ignoring positive (negative) leisure externalities leads to equilibrium consumption, labor and capital that are too high (low) and leisure that is too low (high). The government should tax (subsidize) labor income according to whether the leisure externality is positive or negative. The level of this tax (subsidy) depends on the elasticity of individual and average leisure and the consumption tax. Equilibrium dynamics are characterized, and two shocks to the economy are analyzed - an increase in the growth rate of labor productivity, and an increase in the tax on labor income - by simulating a calibrated economy. Adjustment processes of key variables in a competitive and centrally planned economy with and without leisure externalities are also compared.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 4 (December)
Pages: 1025-1040

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:4:p:1025-1040

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Leisure externalities Transitional dynamics Economic growth;

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References

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Cited by:
  1. Fève, Patrick & Matheron, Julien & Sahuc, Jean-Guillaume, 2011. "Externality in labor supply and government spending," Economics Letters, Elsevier, vol. 112(3), pages 273-276, September.
  2. Angelo Antoci & Mauro Sodini & Luca Zarri, 2012. "Relational Consumption and Nonlinear Dynamics in an Overlapping Generations Model," Working Papers 13/2012, University of Verona, Department of Economics.
  3. Dos Santos Ferreira, Rodolphe & Lloyd-Braga, Teresa & Modesto, Leonor, 2014. "Employment Dynamics and Redistributive Policies under Workers' Social Norms," IZA Discussion Papers 7888, Institute for the Study of Labor (IZA).
  4. Nakamoto, Yasuhiro, 2009. "Convergence speed and preference externalities in a one-sector model with elastic labor supply," Economics Letters, Elsevier, vol. 105(1), pages 86-89, October.
  5. Fabio FIORILLO & Marco LILLA & Stefano STAFFOLANI, 2013. "Advertising Has Got You On The Run. Well-Being, Consumption and Leisure in a GE model," Working Papers 389, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

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