Commodity Taxation and Economic Growth

Koichi Futagami and Junko Doi

The Japanese Economic Review, 2004, vol. 55, issue 1, 46-55

Abstract: We construct a variety expansion growth model following Grossman and Helpman (1991) and incorporate various groups of goods into the model. Each group has its own elasticity of substitution. We seek to determine the goods on which the government should impose higher rates of commodity tax in order to raise a certain amount of tax revenue. We thus reconsider the Ramsey Rule (the Inverse Elasticity Rule) in a growing economy.

Date: 2004
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