Jealousy and underconsumption in a one-sector model with wealth preference

Yasuhiro Nakamoto ()

Journal of Economic Dynamics and Control, 2009, vol. 33, issue 12, 2015-2029

Abstract: The present paper examines the effects of consumption externalities on economic performance in a one-sector model with wealth preference. The presence of the wealth preference generates a wealth effect in consumption growth, which plays a crucial role for consumption externalities to have impacts on the economy. Our main findings are: (i) regardless of the assumption of inelastic labor supply, the distortionary effect of consumption externalities stays in the long run; (ii) the income tax as well as the consumption tax can modify the efficiency; and (iii) the numerical simulations supplement theoretical findings.

Keywords: Consumption; externalities; Wealth; preference; Wealth; effect; Optimal; tax; policy; Intertemporal; welfare (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:33:y:2009:i:12:p:2015-2029

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