Status preferences and optimal corrective taxes: a note

Klaus Beckmann and Susan Gattke ()
Additional contact information
Susan Gattke: Helmut Schmidt University, Hamburg, Postal: Helmut-Schmidt-Universitaet, University of the Federal Armed Forces Hamburg, Department of Economics

No 76/2008, Working Paper from Helmut Schmidt University, Hamburg

Abstract: We take issue with the argument expounded, among others, by Layard (2006, Economic Journal) that status-seeking preferences justify heavier taxation of income because this serves to internalise the negative externality that the pursuit of status imposes on others. In a model where status depends on both income and effort, we show that the optimal corrective tax rate is smaller than if non-monetary status plays no role, and that a subsidy of work effort at the margin may be called for. Additionally, we demonstrate how the elasticity of labour supply depends on the parameters of the status production function in such a model, and discuss potential implications for optimal income taxation.

Pages: 21 pages
Date: 2008-01-31
New Economics Papers: this item is included in nep-pbe and nep-pub
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.hsu-hh.de/fgvwl/index_2V0oRqPqfZzA3qWl.html Full text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.hsu-hh.de/fgvwl/index_2V0oRqPqfZzA3qWl.html [301 Moved Permanently]--> https://www.hsu-hh.de/fgvwl/index_2V0oRqPqfZzA3qWl.html)

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:ris:vhsuwp:2008_076

Access Statistics for this paper

More papers in Working Paper from Helmut Schmidt University, Hamburg Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Bekcmann ( this e-mail address is bad, please contact ).