|CIRJE-F-1041||"Do Consumption Externalities Correspond to the Indivisible Tax Rates on Consumpiton?"|
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This paper puts the apperantly di¤erent distortions of consumption externalities and endogenous consumption taxes to work in the one-sector Ramsey model without any distortions. We will prove that the two distortions can have similar or possibly exact same dynamic impacts on the aggregate economy, only if we use very familiar preferences in macro-dynamic literature. These two distortions ana- lytically have a very close similarity as the obstacle distorting a market equilibrium path and consumption externalities seem the invisible tax rates (transefer rates) on consumption for positive (negative) external e¤ects.