Scandinavian Working Papers in Economics
Umeå Economic Studies,
Umeå University, Department of Economics
No 990: Charity, Status, and Optimal Taxation: Welfarist and Non-Welfarist Approaches
Thomas Aronsson (), Olof Johansson-Stenman () and Ronald Wendner ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Olof Johansson-Stenman: School of Business, Economics and Law, University of Gothenburg, Sweden
Ronald Wendner: Department 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
50 pages, June 18, 2021
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