A Trade-off Between Efficiency and Equity in Adopting Differential Rates to the Consumption Tax (in Japanese)

Tomohiro Murasawa, Michio Yuda and Yasushi Iwamoto

Economic Analysis, 2005, vol. 176, 21-38

Abstract: We conducted a simulation study in which the outcome of a tax reform plan was evaluated from the viewpoint of social welfare. We first compared two tax reform plans that generated an equivalent amount of revenue; one raised the consumption tax to a uniform 10 percent, and the other introduced differential rates. The latter plan achieved higher welfare when the social welfare function was utilitarian. However, when the tax increase grew, not using differential rates achieved higher welfare with a relatively small degree of inequality aversion.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:esj:esriea:176b

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