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Welfare-reducing growth despite individual and government optimization

Siang Ng () and Yew-Kwang Ng ()
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Siang Ng: Department of Economics, Monash University, Clayton, Australia 3168

Social Choice and Welfare, 2001, vol. 18, issue 3, pages 497-506

Abstract: In the presence of substantial relative-income effects and environmental disruption effects, economic growth may be welfare-reducing even if each and all individuals are optimizing and eagerly trying to make more money and the government also maximizes the welfare of individuals by the choice of income-tax rate and the ratio devoted to the abatement of environmental disruption. Welfare-reducing growth may be avoided if environmental disruption may be directed taxed at low costs and/or government spending on public goods is not environmentally disruptive.

Date: 2001-07-12
Note: Received: 2 September 1998/Accepted: 16 February 2000
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