Positional Preferences In Time And Space: Implications For Optimal Income Taxation
AbstractThis paper concerns optimal nonlinear taxation in an OLG model with two ability-types, where people care about their own consumption relative to (i) other people’s current consumption, (ii) own past consumption, and (iii) other people’s past consumption. We show that intertemporal consumption comparisons affect the marginal income tax structure in the same qualitative way as comparisons based on other people’s current consumption. Based on available empirical estimates, comparisons with other people’s current and previous consumption tend to substantially increase the optimal marginal labor income tax rates, while they may either increase or decrease the optimal marginal capital income tax rates.
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Bibliographic InfoPaper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 426.
Length: 39 pages
Date of creation: 22 Jan 2010
Date of revision:
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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Optimal income taxation; asymmetric information; relative consumption; status; habit formation; positional goods;
Other versions of this item:
- Aronsson, Thomas & Johansson-Stenman, Olof, 2010. "Positional Preferences In Time And Space: Implications For Optimal Income Taxation," UmeÃ¥ Economic Studies 800, Umeå University, Department of Economics.
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-30 (All new papers)
- NEP-DGE-2010-01-30 (Dynamic General Equilibrium)
- NEP-LTV-2010-01-30 (Unemployment, Inequality & Poverty)
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- Aronsson, Thomas & Johansson-Stenman, Olof, 2011. "State-Variable Public Goods When Relative Consumption Matters: A Dynamic Optimal Taxation Approach," UmeÃ¥ Economic Studies 828, Umeå University, Department of Economics.
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