Status Effects, Public Goods Provision, and the Excess Burden

Wendner, Ronald; Goulder, Lawrence H.

doi:10.2139/ssrn.1119604

Cited by 29 publications

(39 citation statements)

References 54 publications

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“…By including the status (relative consumption) externalities, Wendner and Goulder [21] estimated a range of m 0 from À0.27 to 0.91, depending on other parameters chosen, significantly lower than previous authors' estimates. So in the next section we also discuss the case m 0 ¼0, which greatly changes one of our results.…”

Section: Parameters Chosenmentioning

confidence: 62%

Tax-versus-trading and efficient revenue recycling as issues for greenhouse gas abatement

Pezzey

Jotzo

2012

Journal of Environmental Economics and Management

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Section: Parameters Chosenmentioning

confidence: 62%

Tax-versus-trading and efficient revenue recycling as issues for greenhouse gas abatement

Pezzey

Jotzo

2012

Journal of Environmental Economics and Management

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“…Wendner & Goulder (2008) show that the optimal provision of public goods tends to be larger when people are motivated by relative consumption concerns than when they are not. The intuition is that there is a zero-sum-game element in private consumption because my increased consumption implies lower utility for you, whereas there is no such element in public consumption.…”

Section: Self-image Social Approval and Status Concernsmentioning

confidence: 92%

Behavioral Economics and Environmental Policy

Carlsson

Johansson‐Stenman

2012

Annu. Rev. Resour. Econ.

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This article provides an interpretive survey on implications of insights from behavioral economics for environmental policy. In particular, it discusses whether, and if so how, policy implications based on conventional economic theory have to be modified when insights from behavioral economics are considered. More specifically, it discusses concerns for cooperation, fairness, self-image, social approval, and status. Moreover, it addresses potential crowdingout effects, context-dependent and incoherent preferences, risk misperceptions, ambiguity aversion, and regulator bias. We conclude that behavioral economics has a lot to offer environmental economics and that some normative policy recommendations have to be modified. Yet the most fundamental policy recommendations in environmental economics generally prevail and are sometimes even reinforced through behavioral economics insights.

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“…Each individual of any generation t treats the measures of reference consumption, i.e., c t À 1 ; c t and c t þ 1 , as exogenous during optimization (while these measures are of course endogenous to the government, as will be explained below). Let l i t 8 An alternative is the (slightly less technically convenient) ratio comparison, where the individual's relative consumption is defined by the ratio between the individual's own consumption and the reference measure (e.g., Boskin and Sheshinski, 1978;Layard, 1980;Abel, 2005;Wendner and Goulder, 2008). Mujcic and Frijters (2013) test models based on difference comparisons, ratio comparisons and ordinal rank without being able to discriminate between them.…”

Section: The Olg Economy and Individual Preferencesmentioning

confidence: 99%

“…The answers to the rule and level issues have often been shown to be quite different, see, e.g., Chang (2000) and Gaube (2000Gaube ( , 2005. Wendner and Goulder (2008) is as far as we know the only paper that has dealt with the level issue of public good provision in a second-best model with relative consumption concerns. 12 A sufficient -but not necessary -condition for this property to hold is that private and public consumption, if measured in the same period, are weak complements in the utility function.…”

Section: The Government's Optimization Problemmentioning

confidence: 99%

State-variable public goods and social comparisons

Aronsson

Johansson‐Stenman

2014

Journal of Environmental Economics and Management

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JEL classification: D62 H21 H23 H41 a b s t r a c tThe optimal provision of a state-variable public good, where the global climate is the prime example, is analyzed in a model where people care about their relative consumption. We consider both keeping-up-with-the-Joneses preferences (where people compare their own current consumption with others' current consumption) and catching-up-withthe-Joneses preferences (where people compare their own current consumption with others' past consumption) in an economy with two productivity types, overlapping generations, and optimal nonlinear income taxation. The extent to which the conventional rules for provision of state-variable public goods (a dynamic analog of the Samuelson rules) ought to be modified is shown to clearly depend on the strength of the relative concerns of both kinds, but also on the preference elicitation format. & 2014 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/3.0/). IntroductionHow much should we spend to combat climate change? Naturally, the answer depends on many factors such as the links between environmental damage and abatement investments, discounting issues, and on the nature of our preferences. It also depends on how the funds for the investment are raised and on related second-best problems of the economy, including how such investments interact with the use of other policy instruments. The present paper concerns the optimal provision rule for a state-variable public good, such that the public good can be seen as a stock that changes over time, in a dynamic economy where people have positional preferences for private consumption. The latter means that people derive utility from their own private consumption relative to that of others -a notion with solid support in both questionnairebased experiments and happiness research. 1 The problem of characterizing the optimal provision of public goods under relative consumption concerns is not new in itself; it has been analyzed in a static setting with lump-sum taxes by Ng (1987), Brekke and Howarth (2002), and Aronsson and Johansson-Stenman (2014a), and in a static setting with second best taxation by Wendner and Goulder (As a consequence of using static models, all these studies have focused on cases where the public good (or bad) is a flow variable, and where the concept of relative consumption lacks a time-dimension. To our knowledge, the optimal provision of public goods under relative consumption concerns in a second-best economy has never been analyzed in a dynamic context, although Brekke and Howarth (2002), Wendner (2003), and Howarth (2006 have examined the implications of environmental externalities in dynamic models where relative consumption matters. 2 There is also a sizable literature on economic growth in models with relative consumption concerns (e.g.. Since this dynamic public good provision problem obviously is more complex than its static counterpart, one may wonder whether t...

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Status Effects, Public Goods Provision, and the Excess Burden

Abstract: and two referees for significant comments on a former version of this paper. We are also grateful to participants of the following workshops and conferences for providing useful suggestions:

Cited by 29 publications

References 54 publications

Tax-versus-trading and efficient revenue recycling as issues for greenhouse gas abatement

Tax-versus-trading and efficient revenue recycling as issues for greenhouse gas abatement

Behavioral Economics and Environmental Policy

State-variable public goods and social comparisons

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