Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 807: Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches
Thomas Aronsson, Olof Johansson-Stenman () and Ronald Wendner
Additional contact information
Thomas Aronsson: Dept of Economics, Umeå School of Business, Umeå University, Sweden
Olof Johansson-Stenman: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Ronald Wendner: Dept of Economics, University of Graz, Austria
Abstract: This paper analyzes optimal taxation of charitable giving to a public good in a Mirrleesian framework with social comparisons. Leisure separability together with zero transaction costs of giving imply that charitable giving should be subsidized to such an extent that governmental contributions are completely crowded out, regardless of whether the government acknowledges warm glows of giving. Stronger concerns for relative charitable giving and larger transaction costs support lower marginal subsidies, whereas relative consumption concerns work in the other direction. A dual screening approach, where charitable giving constitutes an indicator of wealth, is also presents. Numerical simulations supplement the theoretical results.
Keywords: Conspicuous consumption; conspicuous charitable giving; optimal taxation; public good provision; warm glow; multiple screening
51 pages, June 2021
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