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Conspicuous Consumption, Conspicuous Health, and Optimal Taxation

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Abstract

We present a simple model of status-seeking over multiple socioeco- nomic domains by introducing the concept of conspicuous health as an argument in the utility function, in addition to the well-established conspicuous consumption term. We explore the implications of such a utility function for optimal income taxation, where we show an in- crease in concerns for conspicuous health to have an opposite effect on the marginal tax rate, compared to an increase in concerns for conspic- uous consumption. Using life satisfaction panel data from Australia, along with an improved measure of exogenous reference groups (that accounts for the ‘time era’ of respondents), we find evidence of a com- parison health effect.

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  • Redzo Mujcic & Paul Frijters, 2013. "Conspicuous Consumption, Conspicuous Health, and Optimal Taxation," Discussion Papers Series 483, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uq2004:483
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    1. #HEJC papers for October 2013
      by academichealtheconomists in The Academic Health Economists' Blog on 2013-10-01 04:30:26
    2. Conspicuous Consumption, Conspicuous Health, and Optimal Taxation
      by Paul Frijters in Club Troppo on 2013-10-01 12:01:33
    3. Conspicuous Consumption, Conspicuous Health, and Optimal Taxation
      by ? in Core Economics on 2013-10-01 13:00:00
    4. Conspicuous Consumption, Conspicuous Health, and Optimal Taxation
      by Paul Frijters in Core Economics on 2013-10-01 12:00:32

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    Cited by:

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    2. Gallice, Andrea, 2018. "Social status, preferences for redistribution and optimal taxation: A survey," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 12, pages 1-17.
    3. Laszlo Goerke & Michael Neugart, 2021. "Social preferences, monopsony and government intervention," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(2), pages 864-891, May.
    4. Darong Dai, 2020. "Voting over selfishly optimal tax schedules: Can Pigouvian tax redistribute income?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1660-1686, September.
    5. Lars Thiel, 2014. "Illness and Health Satisfaction: The Role of Relative Comparisons," SOEPpapers on Multidisciplinary Panel Data Research 695, DIW Berlin, The German Socio-Economic Panel (SOEP).
    6. Dai, Darong & Gao, Wenzheng & Tian, Guoqiang, 2020. "Relativity, mobility, and optimal nonlinear income taxation in an open economy," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 57-82.
    7. Felix FitzRoy & Michael Nolan & Max Steinhardt & David Ulph, 2014. "Testing the tunnel effect: comparison, age and happiness in UK and German panels," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-30, December.
    8. Melanie Borah & Carina Keldenich & Andreas Knabe, 2019. "Reference Income Effects in the Determination of Equivalence Scales Using Income Satisfaction Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 65(4), pages 736-770, December.
    9. Felix FitzRoy & Jim Jin & Michael Nolan, 2023. "Higher tax and less work: reverse “Keep up with the Joneses” and rising inequality," Journal of Economics, Springer, vol. 139(3), pages 177-190, August.
    10. Shigeoka, Hitoshi & Yamada, Katsunori, 2019. "Income-comparison attitudes in the United States and the United Kingdom: Evidence from discrete-choice experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 164(C), pages 414-438.
    11. Lorenz, Olga, 2018. "Does commuting matter to subjective well-being?," Journal of Transport Geography, Elsevier, vol. 66(C), pages 180-199.
    12. Collewet, Marion & de Grip, Andries & de Koning, Jaap, 2017. "Conspicuous work: Peer working time, labour supply, and happiness," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 68(C), pages 79-90.
    13. Jessica Harriger-Lin & Neha Khanna & Andreas Pape, 2020. "Conspicuous consumption and peer-group inequality: the role of preferences," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(3), pages 365-389, September.
    14. Brown, Sarah & Gray, Daniel, 2016. "Household finances and well-being in Australia: An empirical analysis of comparison effects," Journal of Economic Psychology, Elsevier, vol. 53(C), pages 17-36.
    15. FitzRoy, Felix & Jin, Jim & Nolan, Michael A., 2019. "Higher Tax and Less Work: An Optimal Response to Relative Income Concern," IZA Discussion Papers 12468, Institute of Labor Economics (IZA).
    16. Fiorillo, Damiano & Lubrano Lavadera, Giuseppe & Nappo, Nunzia, 2016. "Social participation and self-rated psychological health," MPRA Paper 72879, University Library of Munich, Germany.
    17. Odermatt, Reto & Stutzer, Alois, 2017. "Subjective Well-Being and Public Policy," IZA Discussion Papers 11102, Institute of Labor Economics (IZA).
    18. FitzRoy, Felix & Jin, Jim, 2021. "Some Welfare Economics of Working Time," IZA Discussion Papers 14810, Institute of Labor Economics (IZA).
    19. Howley, P.; & Knight, S.;, 2018. "Taking pleasure from neighbours’ misfortune: Comparison effects, social norms and the well-being of the unemployed," Health, Econometrics and Data Group (HEDG) Working Papers 18/02, HEDG, c/o Department of Economics, University of York.
    20. Olga Lorenz, 2017. "Does Commuting Matter to Subjective Well-Being?," IAAEU Discussion Papers 201707, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).

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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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