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Social Comparisons and Optimal Taxation in a Small Open Economy
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
Göteborgs universitet.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
2019 (English)In: Scandinavian Journal of Economics, ISSN 0347-0520, E-ISSN 1467-9442, Vol. 121, no 4, p. 1500-1532Article in journal (Refereed) Published
Abstract [en]

In this paper, we analyze how international capital mobility affects the optimal labor and capital income tax policy in a small open economy when consumers care about relative consumption. The main results crucially depend on whether the government can tax returns on savings abroad. If the government can use flexible residence-based capital income taxes, then the optimal policy rules from a closed economy largely carry over to the case of a small open economy. If it cannot, then capital income taxes become completely ineffective. The labor income taxes must then indirectly also reflect the corrective purpose that the absent capital income tax would have had.

Place, publisher, year, edition, pages
John Wiley & Sons, 2019. Vol. 121, no 4, p. 1500-1532
Keywords [en]
capital mobility, optimal taxation, positional goods, relative consumption, smallopen economy
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-145728DOI: 10.1111/sjoe.12308ISI: 000483820800006OAI: oai:DiVA.org:umu-145728DiVA, id: diva2:1190813
Available from: 2018-03-15 Created: 2018-03-15 Last updated: 2019-11-22Bibliographically approved

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Aronsson, ThomasSjögren, Tomas

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