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Consumption And Leisure Externalities, Economic Growth And Equilibrium Efficiency

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  • Manuel A. Gómez

Abstract

This paper analyzes the effects of consumption and leisure externalities on growth and welfare in a two‐sector endogenous growth model with human capital accumulation. Both types of externalities are shown to affect the long‐run equilibrium and optimal growth rates in a rather different way. The relationship between the steady state of the market and the centrally planned economy is also analyzed. The optimal growth path can be decentralized by resorting to consumption or labor income taxation, whereas capital income should be untaxed. Numerical simulations suggest that growth and welfare effects of mild consumption and leisure externalities may be quantitatively important.

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  • Manuel A. Gómez, 2008. "Consumption And Leisure Externalities, Economic Growth And Equilibrium Efficiency," Scottish Journal of Political Economy, Scottish Economic Society, vol. 55(2), pages 227-249, May.
  • Handle: RePEc:bla:scotjp:v:55:y:2008:i:2:p:227-249
    DOI: 10.1111/j.1467-9485.2008.00452.x
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    File URL: https://doi.org/10.1111/j.1467-9485.2008.00452.x
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    Cited by:

    1. 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.
    2. Franco Barrera & Nicolás Garrido, 2018. "Public holidays, tourism, and economic growth," Tourism Economics, , vol. 24(4), pages 473-485, June.
    3. Azariadis, Costas & Chen, Been-Lon & Lu, Chia-Hui & Wang, Yin-Chi, 2013. "A two-sector model of endogenous growth with leisure externalities," Journal of Economic Theory, Elsevier, vol. 148(2), pages 843-857.

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