TY  - JOUR
AU  - Abel,Andrew B.
TI  - Optimal Taxation When Consumers Have Endogenous Benchmark Levels of Consumption
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10099
PY  - 2003
Y2  - November 2003
UR  - http://www.nber.org/papers/w10099
L1  - http://www.nber.org/papers/w10099.pdf
N1  - Author contact info:
Andrew B. Abel
Wharton School
University of Pennsylvania
2315 Steinberg Hall - Dietrich Hall
Philadelphia, PA  19104-6367
Tel: 215/898-4801
Fax: 215/573-7244
E-Mail: abel@wharton.upenn.edu
M1  - published as Abel, Andrew B. "Optimal Taxation When Consumers Have Endogenous Benchmark Levels Of Consumption," Review of Economic Studies, 2005, v72(250,Jan), 21-42.
AB  - I examine optimal taxes in an overlapping generations economy in which each consumer's utility depends on consumption relative to a weighted average of consumption by others (the benchmark level of consumption) as well as on the level of the consumer's own consumption. The socially optimal balanced growth path is characterized by the Modified Golden Rule and by a condition on the intergenerational allocation of consumption in each period. A competitive economy can be induced to attain the social optimum by a lump-sum pay-as-you-go social security system and a tax on capital income.
ER  -