This paper concerns optimal nonlinear taxation in an OLG model with two ability-types, where people care about their own consumption relative to (i) other people’s current consumption, (ii) own past consumption, and (iii) other people’s past consumption. We show that intertemporal...

Almost all previous studies on public policy under relative consumption concerns have ignored the role of leisure for status comparisons. Inspired by Veblen (1899), this paper considers a two-type optimal income tax model, where people care about their relative consumption, and where the...

This paper concerns optimal income taxation in a two-country OLG economy, where each country is characterized by asymmetric information between the government and the private sector, and where one of the countries outsources part of its production to the other. In the country whose firms...

In this paper, we analyze the welfare effects of publicly provided health care in an economy where the consumers have "present-biased" preferences due to quasi-hyperbolic discounting. The analysis is based on a two-type model with asymmetric information between the government and the private...

In this paper, we consider how the retirement age as well as a tax financed pension system ought to respond to a change in the standard deviation of the length of life. In a first best framework, where a benevolent government exercises perfect control over the individuals’ labor supply and...

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...

This paper analyzes the implications of social identity and self-categorization in the context of optimal redistributive income taxation. A two-type model is supplemented by an assumption that individuals select themselves into social categories, in which norms are formed and education effort...

This short paper analyzes whether a federal transfer system can be designed to increase welfare, when state governments create political budget cycles to increase the likelihood of reelection. The results show how the federal government may announce a transfer scheme in advance for the...

This paper deals with optimal income taxation under international outsourcing and FDI. We show how the joint effect of outsourcing and FDI on the optimal marginal income tax rates depends on whether FDI is horizontal or vertical.

This paper concerns green accounting in a global economy, which is characterized by transboundary environmental problems. The world is divided into two separate regions, and the regions differ substantially with respect to income per capita, emissions of greenhouse gases per capita, population...