Status effects, public goods provision, and excess burden

• 成果类型: Article
• 署名作者: Wendner, Ronald; Goulder, Lawrence H.
• 署名单位: University of Graz; Stanford University
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2008.04.011
• 发表日期: 2008
• 页码: 1968-1985
• 关键词: Status effects; Excess burden; deadweight loss; Public goods provision; Corrective taxation; Consumption externality; First best; Second best

摘要

Most studies of the optimal provision of public goods or the excess burden from taxation assume that individual utility is independent of other individuals' consumption. This paper investigates public good provision and excess burden in a model that allows for interdependence in consumption in the form of status (relative consumption) effects. In the presence of such effects, consumption and labor taxes no longer are pure distortionary taxes but have a corrective tax element that addresses an externality from consumption. As a result, the marginal excess burden of consumption taxes is lower than in the absence of status effects, and will be negative if the consumption tax rate is below the Pigouvian rate. Correspondingly, when consumption or labor tax rates are below the Pigouvian rate, the second-best level of public goods provision is above the first-best level, contrary to findings from models without status effects. For plausible functional forms and parameters relating to status effects, the marginal excess burden from existing U.S. labor taxes is substantially lower than in most prior studies, and is negative in some cases. (C) 2008 Elsevier B.V. All rights reserved.