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Conspicious Consumption, Economic Growth, and Taxation: A Generalization

Walter Fisher and Franz X. Hof
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Franz X. Hof: Institute of Economics, University of Technology Vienna

No 77, Economics Series from Institute for Advanced Studies

Abstract: 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.

Keywords: Social status; Conspicuous consumption; Economic growth (search for similar items in EconPapers)
JEL-codes: D62 D91 E21 E62 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2000-03
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