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Seiya Fujisaki
''Optimal fiscal policy with social status and productive government expenditure''
( 2012, Vol. 32 No.1 )
We examine the optimal tax rule in an endogenous growth model with public capital and wealth-enhanced social status. When government expenditure is productive, the equality of marginal productivities of private and public capital holds. Wealth-induced preference can violate this equality, since the marginal utility from private capital is also a value of private capital. We obtain the optimal fiscal policy in which the positive income tax rate is higher than the subsidy rate for saving but is lower than the tax rate in the case without social-status preference.
Keywords: social-status preference, productive government expenditure, the optimal tax rate
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
H5 - National Government Expenditures and Related Policies National Government Expenditures and Related Policies: General
Manuscript Received : Oct 13 2011 Manuscript Accepted : Mar 25 2012

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