Arbeitspapier

Relative Consumption Concerns and the Optimal Tax Mix

This articles studies the optimal tax mix (taxes on income and commodities) under asymmetric information in a two-type model, when individuals make relative consumption comparisons. The model includes both positional and nonpositional goods, taking into account the fact that relative concerns matter for some but not for all commodities. We find that in general the whole tax system is affected by the externalities caused by the consumption of positional goods, notably also the taxes on income and on a non-positional good. The tax rates on positional goods are higher than in the absence of status effects, reflecting their Pigouvian role. The sign of the Pigouvian part in the income tax schedule is ambiguous and depends crucially on whether status goods are complements or substitutes to leisure.

Language
Englisch

Bibliographic citation
Series: NRN Working Paper, NRN: The Austrian Center for Labor Economics and the Analysis of the Welfare State ; No. 1112

Classification
Wirtschaft
Externalities
Taxation and Subsidies: Efficiency; Optimal Taxation
Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Subject
Optimal Taxation
Externalities
Relative Consumption

Event
Geistige Schöpfung
(who)
Eckerstorfer, Paul
Event
Veröffentlichung
(who)
Johannes Kepler University Linz, NRN - The Austrian Center for Labor Economics and the Analysis of the Welfare State
(where)
Linz
(when)
2011

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Eckerstorfer, Paul
  • Johannes Kepler University Linz, NRN - The Austrian Center for Labor Economics and the Analysis of the Welfare State

Time of origin

  • 2011

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