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Self-Control Problems and Conspicuous Housing Consumption:Implications for Tax Policy

Author

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  • Aronsson, Thomas

    () (Department of Economics, Umeå School of Business and Economics)

  • Mannberg, Andrea

    () (Department of Economics, Umeå School of Business and Economics)

Abstract

During the latest decades, household mortgage loans have increased substantially in many countries. We develop an OLG model where housing is a positional consumption good (such that housing choices are partly driven by relative consumption concerns), and where the consumers are also characterized by a preference for immediate gratification due to quasi-hyperbolic discounting. The purpose is to examine how a paternalistic government may reach its preferred resource allocation through a mix of taxes/subsidies on capital income and housing wealth. Our results show that the optimal policy typically implies a marginal savings-subsidy, while the marginal housing wealth may either be taxed or subsidized. Upward social comparisons imply a possible scenario where the housing wealth of the young generation is subsidized and the housing wealth of the middle-aged generation is taxed at the margin.

Suggested Citation

  • Aronsson, Thomas & Mannberg, Andrea, 2013. "Self-Control Problems and Conspicuous Housing Consumption:Implications for Tax Policy," Umeå Economic Studies 856, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0856
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    Cited by:

    1. Aronsson, Thomas & Mannberg, Andrea, 2015. "Relative consumption of housing: Marginal saving subsidies and income taxes as a second-best policy?," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 439-450.

    More about this item

    Keywords

    Conspicuous consumption; self-control problem; housing; optimal taxation;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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