Conspicuous consumption, conspicuous health, and optimal taxation

Redzo Mujcic and Paul Frijters

Journal of Economic Behavior & Organization, 2015, vol. 111, issue C, 59-70

Abstract: We present a simple model of status-seeking over multiple socioeconomic domains by introducing the concept of conspicuous health as an argument in the utility function, in addition to the well-established conspicuous consumption term. We explore the implications of such a utility function for optimal non-linear taxation, where an increase in concerns for conspicuous health has an opposite effect on the marginal tax rate, compared to an increase in concerns for conspicuous consumption. Using life satisfaction panel data from Australia, along with an improved measure of exogenous reference groups (that accounts for the ‘time era’ of respondents), we find empirical evidence of a comparison health effect.

Keywords: Simultaneous status races; Conspicuous health; Optimal taxation; Subjective well-being; Exogenous reference groups; Panel data (search for similar items in EconPapers)
JEL-codes: D03 H21 H51 I10 I18 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Working Paper: Conspicuous Consumption, Conspicuous Health, and Optimal Taxation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:111:y:2015:i:c:p:59-70

DOI: 10.1016/j.jebo.2014.12.017

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