Conspicious Consumption, Economic Growth, and Taxation: A Generalization
This paper studies the infuence of consumption externalities in the Ramsey model. In contrast to the recent literature, a quite general specification of preferences is used and the concept of the effective intertemporal elasticity of substitution is introduced. We give conditions for the observational equivalence between economies with consumption externalities and externality-free economies. An additional key result is that there exist several types of instantaneous utility functions in which the decentralized solution coincides with the socially planned one in spite of the presence of consumption externalities. The conditions for optimal taxation are also derived.
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| Length: | 24 pages |
| Date of creation: | Mar 2000 |
| Handle: | RePEc:ihs:ihsesp:77 |
| Contact details of provider: | Postal: Josefstädterstr. 39, A-1080 Vienna, Austria Phone: ++43 - (0)1 - 599 91 - 0 Fax: ++43 - (0)1 - 599 91 - 555 Web page: http://www.ihs.ac.at More information through EDIRC
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| Order Information: | Postal: Institute for Advanced Studies - Library, Josefstädterstr. 39, A-1080 Vienna, Austria |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frank, Robert H, 1985. "The Demand for Unobservable and Other Nonpositional Goods," American Economic Review, American Economic Association, vol. 75(1), pages 101-116, March.
- Harbaugh, Richmond, 1996. "Falling behind the Joneses: relative consumption and the growth-savings paradox," Economics Letters, Elsevier, vol. 53(3), pages 297-304, December.
- Léonard,Daniel & Long,Ngo van, 1992.
"Optimal Control Theory and Static Optimization in Economics,"
Cambridge Books,
Cambridge University Press, number 9780521331586, September.
- Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465, September.
- Futagami, Koichi & Shibata, Akihisa, 1998. "Keeping one step ahead of the Joneses: Status, the distribution of wealth, and long run growth," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 109-126, July. Full references (including those not matched with items on IDEAS)
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