Business, Management and Accounting
4 years ago

Global tax policies shift to account for international social comparisons.

Umeå Economic Studies
Keeping up with the Joneses, the Smiths and the Tanakas: Optimal Taxation with Social Comparisons in a Multi-Country Economy
Thomas Aronsson, Olof Johansson‐Stenman

Paper Summary

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The article explores how different countries can set optimal tax policies considering people's tendency to compare their income with others both within and across countries. The study shows that when countries compete with each other, they tend to have lower income tax rates, while cooperation leads to higher tax rates. This means that tax policies can be influenced by how people compare their wealth with others, not just within their own country but also internationally.