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Title:Taxes, status goods, and piracy PDF Logo
Authors:Balestrino, Alessandro
Issue Date:2012
Series/Report no.:CESifo working paper: Public Finance 3704
Abstract:This paper studies the design of indirect redistributive taxation and of corrective taxation, as well as the formation of equilibrium indirect tax policies via a political process, in the presence of status goods, allowing for the possibility that illegal copies of those goods may be purchased on black markets (the phenomenon of piracy). Heavy taxation of status goods, despite the fact these are typically overconsumed, is not particularly favoured in a social welfare maximisation context, because the tax rate is highly distortionary, due to the presence of piracy. Corrective taxation, aimed at remedying the inefficiencies associated with the consumption externalities generated by the status goods, is made ineffective by piracy. In contrast with the normative results, the median voter model predicts an inefficiently large tax rate on status goods when piracy is widespread.
Subjects:social status
indirect taxes
corrective taxes
median voter
piracy
JEL:H23
H26
D72
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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