English, Article, Journal or magazine article edition: Social Status and Optimal Income Taxation Jang-Ting Guo; Juin-Jen Chang

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Bookmark: http://trove.nla.gov.au/version/40330
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Social Status and Optimal Income Taxation
Author
  • Jang-Ting Guo
  • Juin-Jen Chang
Physical Description
  • preprint
Notes
  • This paper examines the optimal (first-best) fiscal policy in a stochastic, infinite-horizon representative agent model that exhibits consumption-enhanced as well as wealth-enhanced social status in the household utility. We show that the optimal labor tax rate is a positive constant that is used to correct negative consumption externalities. The optimal capital tax rate is also positive in order to overturn agents' status-seeking capital over-accumulation. Moreover, we find that in contrast to a conventional automatic stabilizer, the optimal capital tax moves in the opposite direction with shocks to firms' production technology. This result turns out to be qualitatively consistent with the discernible empirical evidence that many countries have implemented procyclical fiscal policies.
  • Social Status, Optimal Income Taxation
  • RePEc:ucr:wpaper:200814
Language
  • English
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