Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2010:12: Bling Bling Taxation and the Fiscal Virtues of Hip Hop

Per Engström ()
Additional contact information
Per Engström: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden

Abstract: The paper extends Ng’s (1987) model of optimal taxation of diamond goods — goods that are valued solely for their costliness. We extend his findings by analyzing how other goods should be taxed in the presence of pure diamond goods; modified Ramsey rules are derived in a basic single-type model as well as in a two-type model with redistribution. One key finding, that may be surprising and rather provoking, is that close complements (hip hop music) to diamond goods (bling bling) should be heavily subsidized.

Keywords: optimal taxation; status; luxury taxation

JEL-codes: H20; H21

12 pages, August 17, 2010

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