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Conspicuous consumption, conspicuous health, and optimal taxation

Mujcic, Redzo and Frijters, Paul (2015) Conspicuous consumption, conspicuous health, and optimal taxation. Journal of Economic Behavior and Organization, 111. pp. 59-70. ISSN 0167-2681

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Identification Number: 10.1016/j.jebo.2014.12.017

Abstract

We present a simple model of status-seeking over multiple socioeconomic domains by introducing the concept of conspicuous health as an argument in the utility function, in addition to the well-established conspicuous consumption term. We explore the implications of such a utility function for optimal non-linear taxation, where an increase in concerns for conspicuous health has an opposite effect on the marginal tax rate, compared to an increase in concerns for conspicuous consumption. Using life satisfaction panel data from Australia, along with an improved measure of exogenous reference groups (that accounts for the ‘time era’ of respondents), we find empirical evidence of a comparison health effect.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-econo...
Additional Information: © 2014 Elsevier B.V.
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HJ Public Finance
R Medicine > RA Public aspects of medicine
JEL classification: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency; Optimal Taxation
H - Public Economics > H5 - National Government Expenditures and Related Policies > H51 - Government Expenditures and Health
I - Health, Education, and Welfare > I1 - Health > I10 - General
I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy; Regulation; Public Health
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 07 Feb 2018 15:33
Last Modified: 20 Mar 2019 02:48
URI: http://eprints.lse.ac.uk/id/eprint/86674

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