Quasi-Hyperbolic Discounting and Mixed Taxation
AbstractThis paper develops a dynamic model with endogenous labor supply, savings and health capital, where the consumers differ in ability as well as suffer from a self-control problem generated by quasi-hyperbolic discounting. The purpose is to analyze how a paternalistic government, which implements a time-consistent mix of labor income taxation, capital income taxation and commodity taxation, ought to use this tax system for purposes of redistribution and correction when individual ability is private information. Among the results, we show how the (nonlinear) income taxes ought to be used as indirect instruments for influencing the commodity demand behavior at the individual level: the intuition is that linear commodity taxes are not flexible enough to achieve proper incentives for investments in health capital.
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Bibliographic InfoPaper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 778.
Length: 54 pages
Date of creation: 13 Aug 2009
Date of revision:
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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
Web page: http://www.econ.umu.se/
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Quasi-Hyperbolic Discounting; asymmetric information; income taxation; commodity taxation;
Find related papers by JEL classification:
- D60 - Microeconomics - - Welfare Economics - - - General
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-22 (All new papers)
- NEP-CTA-2009-08-22 (Contract Theory & Applications)
- NEP-PUB-2009-08-22 (Public Finance)
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- Aronsson, Thomas & Granlund, David, 2011. "Public goods and optimal paternalism under present-biased preferences," Economics Letters, Elsevier, vol. 113(1), pages 54-57, October.
- Aronsson, Thomas & Granlund, David, 2010. "Present-Biased Preferences and Publicly Provided Health Care," HUI Working Papers 41, HUI Research.
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