State-variable public goods when relative consumption matters: a dynamic optimal taxation approach
2011 (English)Report (Other academic)
This paper concerns the optimal provision of a state-variable public good, where the global climate is the prime example. The analysis is based on a two-type optimal income tax model with overlapping generations, where people care about their relative consumption. We consider both keeping-up-with-the-Joneses preferences (where people compare their own current consumption with others’ current consumption) and catching-up-with-the-Joneses preferences (where people compare their own current consumption with others’ past consumption). The extent to which the rule for public provision ought to be modified is shown to depend crucially on the preference elicitation format.
Place, publisher, year, edition, pages
2011. , 44 p.
Umeå economic studies, ISSN 0348-1018 ; 828
State variable public goods, asymmetric information, relative consumption, status, positional preferences, climate policy
Research subject Economics
IdentifiersURN: urn:nbn:se:umu:diva-47545OAI: oai:DiVA.org:umu-47545DiVA: diva2:442905