Asymmetric and Non-atmospheric Consumption Externalities, and Efficient Consumption Taxation

Arbeitspapier

We analyze the effects of a generalized class of negative consumption externalities (asymmetric and non-atmospheric) on the structure of effcient commodity tax programs. Households are not only concerned about consumption reference levels - that is, they gain utility from keeping up with the Joneses - they also exhibit altruism. Two sets of efficient tax regimes are compared, based, on a welfarist- and a non-welfarist optimality criterion, respectively. Altruism turns out not to be at odds with the consumption externalities. Rather, altruism implicates a bound on efficient utility allocations. A non-welfarist government tolerates less inequality than a welfarist one. In the welfarist (non-welfarist) case, first-best personalized commodity tax rates respond highly sensitively (barely) to whether or not a consumption externality is asymmetric or non-atmospheric. If personalized commodity tax rates are not available (second-best case), the tax rate on a non- positional good is typically different from zero for corrective reasons. For plausible functional forms and parameter values, numerical simulations suggest that second- best tax rates are rather insensitive with respect to both the optimality criterion and the nature of the consumption externality.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 1301

Classification and Topics

• Classification: Wirtschaft ; Externalities ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
• Subject: Consumption externality ; keeping up with the Joneses ; optimal (commodity) taxation ; genuine altruism ; non-welfarist government

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Eckerstorfer, Paul ; Wendner, Ronald
• Event: Veröffentlichung
• (who): Johannes Kepler University of Linz, Department of Economics
• (where): Linz
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/73611
• Last update: 10.03.2025, 11:44 AM CET