Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/156329
Authors: 
König, Tobias
Lausen, Tobias
Year of Publication: 
2016
Series/Report no.: 
WZB Discussion Paper SP II 2016-213
Abstract: 
This paper shows that the public provision of private goods may be justified on pure efficiency grounds in an environment where individuals have relative consumption concerns. By providing private goods, governments directly intervene in the consumption structure, and thereby have an instrument to correct for the excessive consumption of positional goods. We identify sufficient conditions when the public provision of private goods is always Pareto-improving, even when (linear) consumption taxes are available. In fact, with the public provision of private goods, there are cases where first-best allocations can be achieved, and a luxury tax on the positional good is redundant.
Subjects: 
Public Provision
Social Preferences
Status-Seeking
JEL: 
H42
D62
D63
Document Type: 
Working Paper

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