Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/115075
Authors: 
Eckerstorfer, Paul
Year of Publication: 
2011
Series/Report no.: 
NRN Working Paper, NRN: The Austrian Center for Labor Economics and the Analysis of the Welfare State 1112
Abstract: 
This articles studies the optimal tax mix (taxes on income and commodities) under asymmetric information in a two-type model, when individuals make relative consumption comparisons. The model includes both positional and nonpositional goods, taking into account the fact that relative concerns matter for some but not for all commodities. We find that in general the whole tax system is affected by the externalities caused by the consumption of positional goods, notably also the taxes on income and on a non-positional good. The tax rates on positional goods are higher than in the absence of status effects, reflecting their Pigouvian role. The sign of the Pigouvian part in the income tax schedule is ambiguous and depends crucially on whether status goods are complements or substitutes to leisure.
Subjects: 
Optimal Taxation
Externalities
Relative Consumption
JEL: 
D62
H21
H23
Document Type: 
Working Paper

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