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

  • Wendner, Ronald

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Turnovsky, Stephen J. & Monteiro, Goncalo, 2007. "Consumption externalities, production externalities, and efficient capital accumulation under time non-separable preferences," European Economic Review, Elsevier, vol. 51(2), pages 479-504, February.
  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. 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.
  5. Walter Fisher & Franz Hof, 2000. "Relative consumption, economic growth, and taxation," Journal of Economics, Springer, vol. 72(3), pages 241-262, October.
  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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