Commodity taxation under habit formation and myopia

This paper analyzes the pattern of consumption taxes in a two period model with habit formation and myopia. An individual's second-period needs increase with first period consumption. However, myopic individuals do not see this habit formation relation when they take their saving decision. The...

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Tipo de recurso:
Fecha de publicación:
2010
Institución:
Universidad del Rosario
Repositorio:
Repositorio EdocUR - U. Rosario
Idioma:
eng
OAI Identifier:
oai:repository.urosario.edu.co:10336/23433
Acceso en línea:
https://doi.org/10.2202/1935-1682.2453
https://repository.urosario.edu.co/handle/10336/23433
Palabra clave:
Habit formation
Myopia
Retirement
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dc.title.spa.fl_str_mv Commodity taxation under habit formation and myopia
title Commodity taxation under habit formation and myopia
spellingShingle Commodity taxation under habit formation and myopia
Habit formation
Myopia
Retirement
title_short Commodity taxation under habit formation and myopia
title_full Commodity taxation under habit formation and myopia
title_fullStr Commodity taxation under habit formation and myopia
title_full_unstemmed Commodity taxation under habit formation and myopia
title_sort Commodity taxation under habit formation and myopia
dc.subject.keyword.spa.fl_str_mv Habit formation
Myopia
Retirement
topic Habit formation
Myopia
Retirement
description This paper analyzes the pattern of consumption taxes in a two period model with habit formation and myopia. An individual's second-period needs increase with first period consumption. However, myopic individuals do not see this habit formation relation when they take their saving decision. The first-best solution is decentralized by a simple 'Pigouvian' (paternalistic) consumption tax (along with suitable lump-sum taxes). In a second-best setting, when personalized lump-sum transfers are not available, consumption taxes may have conflicting paternalistic and redistributive effects. Taxes should discourage consumption of goods that entail negative externalities (unforeseen habits), but instead they discourage less the consumption of goods that are proportionately consumed by individuals with high net social marginal utility of income. Both myopic and farsighted individuals may benefit more from the second-best policy as the proportion of myopic agents in society increases. Copyright © 2010 The Berkeley Electronic Press. All rights reserved.
publishDate 2010
dc.date.created.spa.fl_str_mv 2010
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