I examine optimal taxes in an overlapping generations economy in which each consumer's utility depends on consumption relative to a weighted average of consumption by others (the benchmark level of consumption) as well as on the level of the consumer's own consumption. The socially optimal...

We derive a closed-form solution for Tobin's Q in a stochastic dynamic framework. We show analytically that investment is positively related to Tobin's Q and cash flow, even in the absence of adjustment costs or financing frictions. Both Q and investment move in the same direction as expected...

I examine optimal taxes in an overlapping generations economy in which each consumer's utility depends on consumption relative to a weighted average of consumption by others (the benchmark level of consumption) as well as on the level of the consumer's own consumption. The socially optimal...

We derive a closed-form solution for Tobin's Q in a stochastic dynamic framework. We show analytically that investment is positively related to Tobin's Q and cash flow, even in the absence of adjustment costs or financing frictions. Both Q and investment move in the same direction as expected...