The Macroeconomic Effects of Individual Commodity Tax

Kazuki Hiraga
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Kazuki Hiraga: Faculty of Economics, Keio University

No 2011-003, Keio/Kyoto Joint Global COE Discussion Paper Series from Keio/Kyoto Joint Global COE Program

Abstract: This paper investigates the condition which raising individual consumption tax raises output and private consumption in general equilibrium model. In many of the neoclassical papers, the government expenditure decreases consumption because the government expenditure causes the negative wealth shock. On the other hand, the many empirical results are contrary. This contradiction is called "Fiscal Policy Puzzle". But, if the substitution effect of levying on additive ad-valorem commodity tax of a good is larger than the negative wealth effect of taxing and expanding government expenditure, individual tax finance can increase macroeconomic effect, in contrast to lump-sum and general commodity tax.

Pages: 30 pages
Date: 2011
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Citations: View citations in EconPapers (1)

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