Status, Environmental Externality, and Optimal Tax Programs

This paper studies the designs of optimal tax programs in OLG economies when first, consumption of one household lowers (status) utility of others, and second, consumption harms the environment. Status seeking raises optimal consumption tax rates, and lowers optimal tax rates on capital income. I am grateful to an anonymous referee. Further, I am indebted to Kurt Annen, Nicolas Guigas, and Tetsuo Ono for insightful debates on a former version of this paper