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Consumption Taxation, Social Status and Indeterminacy in Models of Endogenous Growth with Elastic Labor Supply

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  • Itaya, Jun-ichi
  • Kanamori, Naoshige

Abstract

This paper examines the effects of consumption taxation on longrun growth in an infinity-lived representative agent model of endogenous growth in which the desire for social status induces private agents to care about others’ wealth or consumption levels. We also allow for nonseparable preferences in own consumption, labor supply and social status that may cause indeterminacy of equilibrium. This analysis shows that consumption taxation generally raises (reduces) a long-run growth rate when the balanced growth path is indeterminate (determinate) in the models of wealth-induced social status and consumption externalities.

Suggested Citation

  • Itaya, Jun-ichi & Kanamori, Naoshige, 2008. "Consumption Taxation, Social Status and Indeterminacy in Models of Endogenous Growth with Elastic Labor Supply," Discussion paper series. A 199, Graduate School of Economics and Business Administration, Hokkaido University.
    • Handle: RePEc:hok:dpaper:199
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    1. Stokey, Nancy L & Rebelo, Sergio, 1995. "Growth Effects of Flat-Rate Taxes," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 519-550, June.
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    6. Walter Fisher & F. Hof, 2008. "The quest for status and endogenous labor supply: the relative wealth framework," Journal of Economics, Springer, vol. 93(2), pages 109-144, March.
    7. Alonso-Carrera, Jaime & Caballé, Jordi & Raurich, Xavier, 2008. "Can consumption spillovers be a source of equilibrium indeterminacy?," Journal of Economic Dynamics and Control, Elsevier, vol. 32(9), pages 2883-2902, September.
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    Cited by:

    1. Chung-Hui Lai & Chen-Sheng Yang, 2018. "The Effects of Unionization in an R&D Growth Model with (In)determinate Equilibrium," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 14(2), pages 107-132, August.
    2. Sanou Issa, 2021. "Jealousy and Wealth Inequality: The Cases of Heterogeneous Preferences and Elastic Labor Supply," Working Papers hal-03408115, HAL.
    3. Seiya Fujisaki, 2012. "Optimal fiscal policy with social status and productive government expenditure," Economics Bulletin, AccessEcon, vol. 32(1), pages 960-968.

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    More about this item

    Keywords

    Social Status; Endogenous Growth; Consumption Externality; Indeterminacy; Consumption Taxation; Endogenous Labor Supply; D62; D90; E62; O40; P10;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • P10 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - General

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