Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/162522
Year of Publication: 
2017
Series/Report no.: 
Discussion Paper No. 18
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
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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