Essays on norms, fairness, individual risk taking and taxation
This dissertation comprises four key chapters, which are based on four substantive essays on social norms, fairness preferences, individual risk taking and the taxation of labor income. Chapter 2 sheds some light on distributive fairness and how these type of a distributional norm affects optimal taxation under uncertainty. Thereby, we consider the social optimum as a benchmark case and compare it to the case of moral hazard where individuals neglect that the fiscal budget has to be balanced. We show how a taste for distributive fairness affects individual risk taking and the degree of redistributive taxation. Based on this, we are able to explore the efficiency properties of taxation chosen by the government under moral hazard. Beyond this, Chapter 3 employs a similiar setting and introduces welfare stigma instead of distributive fairness. This social norm is based on shame or embarrassment individuals experience in case of living off net transfers. Again, we analyze individual risk taking and taxation chosen in the social optimum as well as under moral hazard. This allows us to compare the outcomes of both cases. Next, Chapter 4 analyzes the effects of a work effort norm on socially optimal taxation and the tax rate chosen by majority voting when individual labor supply is endogenous. Based on this, we focus on the question of how the work effort norm affects the efficiency properties of the political equilibrium. Eventually, Chapter 5 employs a shirking-type efficiency wage model where unemployment causes stigma. The existence of welfare stigma affects the individual decision to work or shirk. We then analyze the effects of an ad valorem and unit labor tax on equilibrium wages as well as unemployment competitively chosen by firms.
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