Optimal income tax in the presence of status effects
UNSPECIFIED (2001) Optimal income tax in the presence of status effects. JOURNAL OF PUBLIC ECONOMICS, 81 (2). pp. 193-212. ISSN 0047-2727Full text not available from this repository.
The existence of distortions from individuals competing to attain social status by using consumption signals justifies some measure of income tax as a counter-acting distortion. The question posed here is whether it also constitutes a reason for a more progressive income tax schedule. The answer is found to be broadly negative if progressiveness is interpreted as a more convex tax schedule, unless the rich are more concerned with status-seeking than the poor. On the other hand, status-seeking makes the optimal tax schedule steeper so that redistribution is increased. Essentially, the analysis of status-seeking based on a signaling approach confirms and strengthens the existing view of an optimal tax schedule, and can be incorporated into the Diamond [American Economic Review 88 (1998) 83-95] approach. (C) 2001 Elsevier Science B.V. All rights reserved.
|Item Type:||Journal Article|
|Subjects:||H Social Sciences > HC Economic History and Conditions|
|Journal or Publication Title:||JOURNAL OF PUBLIC ECONOMICS|
|Publisher:||ELSEVIER SCIENCE SA|
|Number of Pages:||20|
|Page Range:||pp. 193-212|
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