A Dynamic Model of Fiscal Reconstruction

Toshihiro Ihori and Jun-ichi Itaya ()
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Toshihiro Ihori: Faculty of Economics, University of Tokyo.

No 97-F-15, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper investigates dynamic properties of fiscal reconstruction by analysing the infinite duration dynamic game among various interest groups with a framework of voluntary acceptance of tax burden. By comparing the first best solution, the open-loop solution under enforceable commitments, and the closed-loop solution without commitment, we explore the free riding aspect of fiscal reconstruction process and investigate the normative role of consumption taxes to internalize the free riding problem. We also derive explicitly the adjustment speeds of fiscal reconstruction under alternative solutions and examine the impact of consumption taxes on the adjustmet speed.

Pages: 36 pages
Date: 1997-04
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Related works:
Journal Article: A dynamic model of fiscal reconstruction (2001)
Working Paper: A Dynamic Model of Fiscal Reconstruction (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:97f15

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