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Veblen’s Theory of the Leisure Class Revisited: Implications for Optimal Income Taxation
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
Department of Economics, School of Business, Economics and Law, University of Gothenburg, 40530, Göteborg, Sweden.
2013 (English)In: Social Choice and Welfare, ISSN 0176-1714, E-ISSN 1432-217x, Vol. 41, no 3, 551-578 p.Article in journal (Refereed) Published
Abstract [en]

Several previous studies have demonstrated the importance of relative consumption comparisons for public policy. Yet, almost all of them have ignored the role of leisure for status comparisons. Inspired by Veblen (The theory of the leisure class. Macmillan, New York, 1899), this paper assumes that people care about their relative consumption and that leisure has a displaying role in making relative consumption more visible, based on a two-type model of optimal income taxation. While increased importance of relative consumption typically implies higher marginal income tax rates, in line with previous research, the effect of leisure-induced consumption visibility is to make the income tax more regressive in terms of ability.

Place, publisher, year, edition, pages
Springer, 2013. Vol. 41, no 3, 551-578 p.
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URN: urn:nbn:se:umu:diva-80663DOI: 10.1007/s00355-012-0701-3ISI: 000323254900005OAI: diva2:650705
Swedish Research Council, 421-2010-1420Riksbankens Jubileumsfond
Available from: 2013-09-23 Created: 2013-09-23 Last updated: 2014-01-14Bibliographically approved

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