Optimal tax models, starting from Ramsey (1927), are often studied using a single government. However, there are several countries which are federations and in that multiple levels of government have fiscal authority, which masks the heterogeneity across states. In this paper we study a...

Based on an endogenous growth model, this paper characterizes the conditions under which positional preferences do not give rise to intertemporal distortions as well as derives an optimal tax policy response in cases where these conditions are not satisfied. In our model, individuals can be...