Munich Personal RePEc Archive

Positional Preferences, Endogenous Growth, and Optimal Income- and Consumption Taxation

Ghosh, Sugata and Wendner, Ronald (2014): Positional Preferences, Endogenous Growth, and Optimal Income- and Consumption Taxation.

[img]
Preview
PDF
MPRA_paper_60337.pdf

Download (4MB) | Preview

Abstract

This paper analyzes the impact of positional preferences, exhibiting conspicuous consumption and conspicuous wealth, on optimal consumption- and income taxes, for an endogenous growth model with public capital. Positional preferences raise the endogenous growth rate if the elasticity of intertemporal substitution is larger than one. Even if labor supply is exogenous, the consumption externalities introduce distortions so long as preferences are wealth-dependent, and with or without the presence of conspicuous wealth. Consequently, optimal consumption- and income taxes differ from zero. Numerical simulations present the effects of fiscal policy on the balanced growth path and transitional dynamics.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.