Growth and Distributional Effects of Inflation with Progressive Taxation

Fujisaki Seiya and Kazuo Mino

MPRA Paper from University Library of Munich, Germany

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 inflation tax are rather small. In contrast, fiscal distortion caused by progressive taxation yield significant impacts on growth and distribution

Keywords: Inflation Tax; Progressive Income Tax; Growth; Income Distribution (search for similar items in EconPapers)
JEL-codes: E32 O40 (search for similar items in EconPapers)
Date: 2010-10-20
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-mac
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Journal Article: Growth and Distributional Effects of Inflation with Progressive Taxation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26113

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