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When the Joneses’ consumption hurts: Optimal public good provision and nonlinear income taxation
Umeå University, Faculty of Social Sciences, Department of Economics.
Department of Economics, School of Business, Economics and Law, Göteborg University, Göteborg, Sweden.
2008 (English)In: Journal of Public Economics, ISSN 0047-2727, E-ISSN 1879-2316, Vol. 92, no 5-6, 986-997 p.Article in journal (Refereed) Published
Abstract [en]

This paper considers a model with nonlinear income taxation and public good provision when people care about their relative consumption compared to others. The standard optimality expressions are modified by terms that reflect the extent to which people care about relative consumption. The extent to which the public good provision rule should be modified is shown to depend critically on the preference elicitation format. The modified tax formulas imply substantially higher marginal income tax rates than in the conventional case, under plausible assumptions and available empirical estimates regarding comparison consumption concerns.

Place, publisher, year, edition, pages
Elsevier, 2008. Vol. 92, no 5-6, 986-997 p.
Keyword [en]
Optimal taxation, Redistribution, Public goods, Relative consumption, Status, Positional goods
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Research subject
URN: urn:nbn:se:umu:diva-9557DOI: 10.1016/j.pubeco.2007.12.007OAI: diva2:149228
Available from: 2008-04-24 Created: 2008-04-24 Last updated: 2012-08-28Bibliographically approved

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ReferencesLink to record
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