When Samuelson Met Veblen Abroad: National and Global Public Good Provision when Social Comparisons Matter

This paper derives Pareto efficient policy rules for the provision of national as well as global public goods in a two-country world, where each individual cares about relative consumption within as well as between countries. Furthermore, we compare these policy rules with those that follow from a non-cooperative Nash equilibrium. The results show that both global and national public goods are systematically under-provided in Nash equilibrium under such relative consumption concerns.