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Status, environmental externality, and optimal tax programs

Author

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  • Ronald Wendner

    (Department of Economics, Graz University, Austria)

Abstract

This paper studies the designs of optimal tax programs in OLG economies when first, consumption of one household lowers (status) utility of others, and second, consumption harms the environment. Status seeking raises optimal consumption tax rates, and lowers optimal tax rates on capital income.

Suggested Citation

  • Ronald Wendner, 2003. "Status, environmental externality, and optimal tax programs," Economics Bulletin, AccessEcon, vol. 8(5), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-02h20005
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    References listed on IDEAS

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    1. Tetsuo Ono, 2002. "Is habitual consumption harmful to the environment?," Economics Bulletin, AccessEcon, vol. 17(1), pages 1-10.
    2. John, A & Pecchenino, R, 1994. "An Overlapping Generations Model of Growth and the Environment," Economic Journal, Royal Economic Society, vol. 104(427), pages 1393-1410, November.
    3. Erosa, Andres & Gervais, Martin, 2002. "Optimal Taxation in Life-Cycle Economies," Journal of Economic Theory, Elsevier, vol. 105(2), pages 338-369, August.
    4. Ono, Tetsuo, 1996. "Optimal tax schemes and the environmental externality," Economics Letters, Elsevier, vol. 53(3), pages 283-289, December.
    5. Dutta, P.K., 1991. "What Do Discounted Optima Converge To? A Theory of Discount Rate Asymptotics in Economic Models," RCER Working Papers 264, University of Rochester - Center for Economic Research (RCER).
    6. Harald Uhlig & Lars Ljungqvist, 2000. "Tax Policy and Aggregate Demand Management under Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 90(3), pages 356-366, June.
    7. Ng, Yew-Kwang & Wang, Jianguo, 1993. "Relative income, aspiration, environmental quality, individual and political myopia : Why may the rat-race for material growth be welfare-reducing?," Mathematical Social Sciences, Elsevier, vol. 26(1), pages 3-23, July.
    8. repec:ebl:ecbull:v:17:y:2002:i:1:p:1-10 is not listed on IDEAS
    9. Dutta, Prajit K., 1991. "What do discounted optima converge to?: A theory of discount rate asymptotics in economic models," Journal of Economic Theory, Elsevier, vol. 55(1), pages 64-94, October.
    10. Howarth, Richard B., 1996. "Status effects and environmental externalities," Ecological Economics, Elsevier, vol. 16(1), pages 25-34, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Thi Kim Cuong Pham, 2019. "Keeping up with or running away from the Joneses: the Barro model revisited," Journal of Economics, Springer, vol. 126(2), pages 179-192, March.
    2. Nguyen-Van, Phu & Pham, Thi Kim Cuong, 2013. "Endogenous fiscal policies, environmental quality, and status-seeking behavior," Ecological Economics, Elsevier, vol. 88(C), pages 32-40.
    3. Tetsuo Ono, 2007. "Environmental Tax Reform, Economic Growth, and Unemployment in an OLG Economy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 133-161, March.
    4. Aronsson, Thomas & Johansson-Stenman, Olof, 2014. "State-variable public goods and social comparisons," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 390-410.
    5. Graafland, J.J., 2010. "Why Status Effects Need not Justify Egalitarian Income Policy," Discussion Paper 2010-73, Tilburg University, Center for Economic Research.
    6. Luciano Fanti & Luca Gori, 2010. "Economic Growth and Welfare in a Neoclassical Overlapping Generations Growth Model with Minimum Wages and Consumption Taxes," LABOUR, CEIS, vol. 24(3), pages 238-262, September.
    7. Bouché, Stéphane & de Miguel, Carlos, 2019. "Endogenous aspirations, growth and the rise of environmental concerns," Energy Economics, Elsevier, vol. 84(S1).
    8. Yoshihiro Hamaguchi, 2021. "Environmental policy and social status preference for education in an Uzawa–Lucas model," Bulletin of Economic Research, Wiley Blackwell, vol. 73(3), pages 456-468, July.
    9. Kristen B. Cooper, 2017. "Consumer well-being in a future of accelerating novelty," Journal of Evolutionary Economics, Springer, vol. 27(2), pages 315-335, April.
    10. Chen, Jhy-hwa & Yang, Chih-yu & Shieh, Jhy-yuan & Chang, Juin-jen, 2020. "Consumption aspirations in dirty and clean goods and economic growth," Economic Modelling, Elsevier, vol. 87(C), pages 254-266.

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    More about this item

    Keywords

    consumption tax;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D1 - Microeconomics - - Household Behavior

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