 Positional Preferences: Efficiency and Distortions under Welfarist- and Paternalistic GovernmentsRon Wendner and Sugata Ghosh MPRA Paper from University Library of Munich, Germany Abstract: This paper analyzes the distortionary effects of positional preferences when labor supply is exogenous under both a welfarist and a paternalistic government. Extending the prior literature, reference levels may be partially exogenous to the government (e.g., determined by consumption choices in a foreign country), and individuals may be positional with respect to wealth in addition to consumption. Neither consumption- nor consumption-cum-wealth positionality needs to cause inter-temporal distortions under either welfare criterion. We derive necessary and sufficient conditions for non-distortion of positional preferences. If those conditions are not satisfied, the same reference levels of consumption and wealth can give rise to under-saving or to over-saving -- depending on the extend to which the reference levels are exogenous to the government. Moreover, we provide conditions for which positional preferences for wealth and consumption imply over-consumption with respect to the welfarist criterion but, at the same time, over-saving with respect to the paternalistic criterion. Keywords: Status; keeping up with the Joneses; positional preferences; distortion; welfarist government; paternalistic government; Ak model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:77839 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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