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State-variable public goods and social comparisons

Listed author(s):
  • Aronsson, Thomas
  • Johansson-Stenman, Olof

The optimal provision of a state-variable public good, where the global climate is the prime example, is analyzed in a model where people care about their relative consumption. We consider both keeping-up-with-the-Joneses preferences (where people compare their own current consumption with others’ current consumption) and catching-up-with-the-Joneses preferences (where people compare their own current consumption with others’ past consumption) in an economy with two productivity types, overlapping generations, and optimal nonlinear income taxation. The extent to which the conventional rules for provision of state-variable public goods (a dynamic analog of the Samuelson rules) ought to be modified is shown to clearly depend on the strength of the relative concerns of both kinds, but also on the preference elicitation format.

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File URL: http://www.sciencedirect.com/science/article/pii/S0095069614000424
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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 68 (2014)
Issue (Month): 2 ()
Pages: 390-410

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Handle: RePEc:eee:jeeman:v:68:y:2014:i:2:p:390-410
DOI: 10.1016/j.jeem.2014.07.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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