Behavioral optimal taxation: Aspirations

Matthias Weber

Journal of Behavioral Economics for Policy, 2021, vol. 5, issue 1, 19-26

Abstract: I show the results of a novel simple two-period model comparing lump-sum taxes with proportional labor taxes. The difference to the classical optimal taxation literature is that people's aspirations change from one period to another, as suggested by empirical evidence. It turns out that the policy implication from this model differs considerably from the one assuming full rationality. In the behavioral model, a lump-sum tax is much less attractive. The model does not aim to be a full-fledged quantitative model, it should rather be seen as a cautionary tale about the robustness of classical optimal taxation results when deviating from full rationality.

Keywords: easterlin paradox; behavioral public finance; behavioral optimal taxation; aspirations (search for similar items in EconPapers)
JEL-codes: D60 D90 H21 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://sabeconomics.org/journal/RePEc/beh/JBEPv1/articles/JBEP-5-1-3.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:beh:jbepv1:v:5:y:2021:i:1:p:19-26

Access Statistics for this article

Journal of Behavioral Economics for Policy is currently edited by Michelle Baddeley

More articles in Journal of Behavioral Economics for Policy from Society for the Advancement of Behavioral Economics (SABE) Contact information at EDIRC.
Bibliographic data for series maintained by SABE ().