IDEAS home Printed from
   My bibliography  Save this article

Equilibrium efficiency in the Ramsey model with utility and production externalities


  • Manuel A. Gómez


Purpose - The purpose of this paper is to analyze the effect of utility and production externalities on the equilibrium efficiency, and to devise tax policies capable of correcting the distortions caused by the external effects. Design/methodology/approach - The paper analyzes a Ramsey-type model with utility and production externalities. It compares the decentralized equilibrium in the market economy with the optimal growth path attainable by a central planner. Findings - The paper shows the effects of utility and production externalities on competitive long-run equilibrium values. It devises optimal tax policies capable of decentralizing the optimal growth path, and shows how the leisure specification affects the optimal tax policy. Practical implications - The paper adds to the literature on optimal taxation, and provides theoretical results that may help policy makers to set the tax policy. Originality/value - The paper analyzes the equilibrium efficiency in a rather general model with utility externalities, associated with both consumption and leisure, and production externalities. Equilibrium efficiency is studied under the two typical leisure specifications proposed in the literature: home production and raw time. This allows one to analyze the effect that the leisure specification has on the optimal tax policy.

Suggested Citation

  • Manuel A. Gómez, 2009. "Equilibrium efficiency in the Ramsey model with utility and production externalities," Journal of Economic Studies, Emerald Group Publishing, vol. 36(4), pages 355-370, September.
  • Handle: RePEc:eme:jespps:v:36:y:2009:i:4:p:355-370

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:36:y:2009:i:4:p:355-370. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.