Boosting taxes for boasting about houses? Status concerns in the housing market

Johannes Schünemann and Timo Trimborn

Journal of Economic Behavior & Organization, 2023, vol. 205, issue C, 120-143

Abstract: In this paper we investigate the implications for housing taxation when households have status concerns for residential housing. For this purpose we introduce a residential housing sector and status concerns for housing into a neoclassical model with heterogeneous agents. First, finding that status concerns exert a negative externality, we calculate a progressive Pigovian tax schedule that corrects for the externality. Implementing the tax schedule is associated with a moderate aggregate welfare gain, but has a sizable and diverse impact on household groups’ welfare. Second, we find that when the utilitarian social planner is constrained to housing taxes, Pigovian taxation is not constraint efficient. We show that the welfare maximizing tax of the constrained optimum is always higher than the Pigovian tax, and we analyze the mechanism behind this finding. Our results have strong implications for the optimal taxation of residential housing.

Keywords: Status concerns; Residential housing; Pigovian tax; Constrained efficiency (search for similar items in EconPapers)
JEL-codes: D10 E62 H21 O10 R31 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268122003948
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Boosting Taxes for Boasting about Houses? Status Concerns in the Housing Market (2019)
Working Paper: Boosting taxes for boasting about houses? Status concerns in the housing market (2018)
Working Paper: Boosting taxes for boasting about houses: Status concerns in the housing market (2017)
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:eee:jeborg:v:205:y:2023:i:c:p:120-143

DOI: 10.1016/j.jebo.2022.10.037

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().