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The Demand for Status and Optimal Capital Taxation

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  • Li, Fanghui
  • Wang, Gaowang

Abstract

The paper examines the famous Chamley-Judd zero capital tax theorem in model economies where agents care about their social status. We show that the limiting capital income tax is not zero in general and its sign depends only on the utility specifications. Our conclusion is robust to several important extensions: the model with multiple physical capitals, the model with both human and physical capitals, and the one with heterogeneous agents.

Suggested Citation

  • Li, Fanghui & Wang, Gaowang, 2019. "The Demand for Status and Optimal Capital Taxation," MPRA Paper 96076, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:96076
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    More about this item

    Keywords

    Demand for Status; Capital Income Tax; Human Capital; Heterogeneous Agents;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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