EconPapers    
Economics at your fingertips  
 

Keeping up with the Joneses, the Smiths and the Tanakas: On international tax coordination and social comparisons

Thomas Aronsson and Olof Johansson-Stenman ()

Journal of Public Economics, 2015, vol. 131, issue C, 71-86

Abstract: Recent evidence suggests that social comparisons between people in different countries have become more important over time due to globalization. This paper deals with optimal nonlinear income taxation in an international setting, where consumers derive utility from their relative consumption compared both with other domestic residents and people in another country. The optimal tax policy in our framework reflects both correction for positional externalities and redistributive aspects of such correction due to the incentive constraint facing each government. If the national governments behave as Nash competitors to each other, the resulting tax policy only internalizes the externalities that are due to within-country comparisons, whereas the tax policy chosen by the leader country in a Stackelberg game also to some extent reflects between-country comparisons. We also derive globally Pareto-efficient tax policies in a cooperative framework, and conclude that there are potentially large welfare gains of international tax policy coordination.

Keywords: Optimal taxation; Relative consumption; Inter-jurisdictional comparison; Asymmetric information; Status; Positional goods (search for similar items in EconPapers)
JEL-codes: D03 D62 D82 H23 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272715001395
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Keeping up with the Joneses, the Smiths and the Tanakas: On International Tax Coordination and Social Comparisons (2015) Downloads
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:131:y:2015:i:c:p:71-86

DOI: 10.1016/j.jpubeco.2015.08.004

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 ().

 
Page updated 2025-03-19
Handle: RePEc:eee:pubeco:v:131:y:2015:i:c:p:71-86