Asymmetric and non-atmospheric consumption externalities, and efficient consumption taxation
Paul Eckerstorfer and
Ron Wendner
Journal of Public Economics, 2013, vol. 106, issue C, 42-56
Abstract:
We analyze the effects of a generalized class of negative consumption externalities (asymmetric and non-atmospheric) on the structure of efficient commodity tax programs. Households are not only concerned about consumption reference levels — that is, they gain utility from “keeping up with the Joneses” — but they also exhibit altruism. Two sets of efficient tax regimes are compared, based, on a welfarist- and a non-welfarist optimality criterion, respectively. Altruism turns out not to be at odds with the consumption externalities. Rather, altruism implicates a bound on efficient utility allocations. A non-welfarist government tolerates less inequality than a welfarist one. In the welfarist (non-welfarist) case, first-best personalized commodity tax rates respond highly sensitively (barely) to whether or not a consumption externality is asymmetric or non-atmospheric. If personalized commodity tax rates are not available (second-best case), the tax rate on a non-positional good is typically different from zero for corrective reasons. For plausible functional forms and parameter values, numerical simulations suggest that second-best tax rates are rather insensitive with respect to both the optimality criterion and the “nature” of the consumption externality.
Keywords: Consumption externality; Keeping up with the Joneses; Efficient commodity taxation; Genuine altruism; Non-welfarist government (search for similar items in EconPapers)
JEL-codes: D62 H21 H23 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (54)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272713001473
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Asymmetric and Non-atmospheric Consumption Externalities, and Efficient Consumption Taxation (2013) 
Working Paper: Asymmetric and Non-atmospheric Consumption Externalities, and Efficient Consumption Taxation (2013) 
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:pubeco:v:106:y:2013:i:c:p:42-56
DOI: 10.1016/j.jpubeco.2013.07.003
Access Statistics for this article
Journal of Public Economics is currently edited by R. Boadway and J. Poterba
More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().