Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 662: Optimal Paternalism: Sin Taxes and Health Subsidies

Thomas Aronsson () and Linda Thunström ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Linda Thunström: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

Abstract: The starting point for this paper is the potential self-control problem underlying the consumption of unhealthy food. The purpose is to analyze public policies, which are designed to correct for the welfare loss associated with such behavior. Contrary to previous studies, our analysis suggests that subsidies on wealth and health capital are part of the policy package, which can be used to implement a socially optimal resource allocation.

Keywords: Health; Quasi-Hyperbolic Discounting; Taxes; Subsidies

JEL-codes: D61; D62; H21; I18

15 pages, May 11, 2005

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