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Relative consumption preferences and public provision of private goods
[working paper]
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Wissenschaftszentrum Berlin für Sozialforschung gGmbH
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 c... view more
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.... view less
Keywords
supply; consumption; social status
Classification
Sociology of Economics
Free Keywords
D62; D63; H42; public provision; social preferences; status-seeking
Document language
English
Publication Year
2016
City
Berlin
Page/Pages
48 p.
Series
Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Abteilung Verhalten auf Märkten, SP II 2016-213
Handle
http://hdl.handle.net/10419/156329
Status
Published Version; peer reviewed
Licence
Deposit Licence - No Redistribution, No Modifications