Aronsson, Thomas () (Department of Economics, Umeå University) Sjögren, Tomas () (Department of Economics, Umeå University)
Abstract
This 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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Publisher Info
Paper 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: Handle: RePEc:hhs:umnees:0778
Contact details of provider: Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden Phone: 090 - 786 61 42 Fax: 090 - 77 23 02 Email: Web page: http://www.econ.umu.se/ More information through EDIRC
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