Growth and Distributional Effects of Inflation with Progressive Taxation

Seiya Fujisaki () and Kazuo Mino
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Seiya Fujisaki: Department of Education, Shinshu University

Economics Bulletin, 2010, vol. 30, issue 4, 3055-3065

Abstract: This paper examines the growth and income distribution effects of inflation in a growing economy with heterogeneous households and progressive income taxation. Assuming that the cash-in-advance constraint applies to investment as well as to consumption spending, we show that a higher growth of monetary supply yields a negative impact on growth and an ambiguous effect on income distribution. Numerical example with plausible parameter values, however, demonstrate that those long-run effects of money growth are rather small. In contrast, fiscal distortion caused by progressive taxation yield significant impacts on growth and distribution.

Keywords: Inflation; Progressive Income Tax; Growth; Income Distribution (search for similar items in EconPapers)
JEL-codes: E4 H2 (search for similar items in EconPapers)
Date: 2010-11-18
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Working Paper: Growth and Distributional Effects of Inflation with Progressive Taxation (2010)
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