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Positional concerns in an OLG model: optimal labor and capital income taxation
Umeå University, Faculty of Social Sciences, Department of Economics.
University of Gothenburg, Sweden.
2010 (English)In: International Economic Review, ISSN 0020-6598, E-ISSN 1468-2354, Vol. 51, no 4, 1071-1095 p.Article in journal (Refereed) Published
Abstract [en]

This article concerns optimal income taxation under asymmetric information in a two-type OLG model when individuals' relative consumption matters. Positional concerns affect the policy choices via two channels: (i) the average degree of positionality and (ii) positionality differences between the low-ability type and the mimicker. Under plausible empirical estimates, the marginal labor income tax rates become substantially larger, and the absolute value of the marginal capital income tax rate of the low-ability type becomes substantially smaller, than in the conventional model. In addition to measures of reference consumption based on average consumption, we also address within-generation and upward comparisons.

Place, publisher, year, edition, pages
Malden: Wiley-Blackwell, 2010. Vol. 51, no 4, 1071-1095 p.
Keyword [en]
public good provision, relative income, conspicuous consumption, easterlin paradox, happiness, policy, goods, redistribution, competition, jealousy
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Research subject
URN: urn:nbn:se:umu:diva-26819DOI: 10.1111/j.1468-2354.2010.00611.xISI: 000284288500007OAI: diva2:274229
Available from: 2009-10-27 Created: 2009-10-27 Last updated: 2016-09-02Bibliographically approved

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Aronsson, Thomas
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