Skip to main content

Research Repository

Advanced Search

Higher tax and less work: reverse “Keep up with the Joneses” and rising inequality

FitzRoy, Felix; Jin, Jim; Nolan, Michael


Felix FitzRoy

Jim Jin

Dr Michael Nolan
Senior Lecturer in Economics and HUBS Undergraduate Admissions Tutor


To counteract excessive effort due to relative income comparison among identical agents, the literature suggests a tax response equal to the negative externality. Assuming a general income distribution, we show that an optimal tax must be higher under a general social welfare function, to not only reduce inefficiency but also inequality. We recommend a practical tax response to stronger comparison – to hold employment constant, which does not require unrealistic information including unobservable comparison. Surprisingly, the tax response will dominate the comparison effect and reduce labour supply or reverse “keeping up with the Joneses” on intensive margins, and also reverse the otherwise rising inequality.


FitzRoy, F., Jin, J., & Nolan, M. (in press). Higher tax and less work: reverse “Keep up with the Joneses” and rising inequality. Journal of Economics,

Journal Article Type Article
Acceptance Date Feb 27, 2023
Online Publication Date Mar 29, 2023
Deposit Date Apr 3, 2023
Publicly Available Date Apr 3, 2023
Journal Journal of Economics/ Zeitschrift fur Nationalokonomie
Print ISSN 0931-8658
Electronic ISSN 1617-7134
Publisher Springer
Peer Reviewed Peer Reviewed
Keywords Income comparison; Maxi-min; Inequality; Unemployment
Public URL


Published article (945 Kb)

Publisher Licence URL

Copyright Statement
© The Author(s) 2023.
Open Access. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit

You might also like

Downloadable Citations