Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 426: POSITIONAL PREFERENCES IN TIME AND SPACE: IMPLICATIONS FOR OPTIMAL INCOME TAXATION
Thomas Aronsson () and Olof Johansson-Stenman ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå University, Postal: 901 87 Umeå, Sweden
Olof Johansson-Stenman: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: This paper concerns optimal nonlinear taxation in an OLG model with two ability-types, where people care about their own consumption relative to (i) other people’s current consumption, (ii) own past consumption, and (iii) other people’s past consumption. We show that intertemporal consumption comparisons affect the marginal income tax structure in the same qualitative way as comparisons based on other people’s current consumption. Based on available empirical estimates, comparisons with other people’s current and previous consumption tend to substantially increase the optimal marginal labor income tax rates, while they may either increase or decrease the optimal marginal capital income tax rates.
Keywords: Optimal income taxation; asymmetric information; relative consumption; status; habit formation; positional goods
39 pages, January 22, 2010
Full text files
21819 HTML file
Questions (including download problems) about the papers in this series should be directed to Jessica Oscarsson ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:gunwpe:0426This page generated on 2024-11-14 18:33:27.