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Paternalism against Veblen: Optimal Taxation and Non-respected Preferences for Social Comparisons
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
Göteborgs universitet.
2018 (English)In: American Economic Journal: Economic Policy, ISSN 1945-7731, E-ISSN 1945-774X, Vol. 10, no 1, p. 39-76Article in journal (Refereed) Published
Abstract [en]

This paper compares optimal nonlinear income tax policies of welfarist and paternalist governments, where the latter does not respect individual preferences regarding relative consumption. Consistent with previous findings, relative consumption concerns typically induce a welfarist government to increase the marginal tax rates to internalize positional externalities. Remarkably, the optimal marginal tax rules are often very similar in the paternalist case, where such externalities are not taken into account. We identify several cases where the marginal tax rules are indeed identical between the governments. Numerical simulations show that marginal and average tax levels and the overall redistribution are often also similar.

Place, publisher, year, edition, pages
2018. Vol. 10, no 1, p. 39-76
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-132964DOI: 10.1257/pol.20150369ISI: 000424292800002OAI: oai:DiVA.org:umu-132964DiVA, id: diva2:1084746
Funder
Swedish Research Council, 2016-02371Available from: 2017-03-27 Created: 2017-03-27 Last updated: 2018-06-09Bibliographically approved

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Aronsson, Thomas

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