Relative Consumption Preferences and Public Provision of Private Goods

König, Tobias und Lausen, Tobias (2017): Relative Consumption Preferences and Public Provision of Private Goods. Collaborative Research Center Transregio 190, Discussion Paper No. 18

Abstract

This paper shows that the public provision of private goods may be justified on pure efficiency grounds in an environment where individuals have relative consumption concerns. By providing private goods, governments directly intervene in the consumption structure, and thereby have an instrument to correct for the excessive consumption of positional goods. We identify sufficient conditions when the public provision of private goods is always Pareto-improving, even when (linear) consumption taxes are available. In fact, with the public provision of private goods, there are cases where first-best allocations can be achieved, and a luxury tax on the positional good is redundant.

• Dokumententyp: Paper
• Keywords: public provision; social preferences; status-seeking
• Fakultät: Volkswirtschaft > Collaborative Research Center Transregio "Rationality and Competition"
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: H42, D62, D63
• Sprache: Englisch