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Growth and Distributional Effects of Inflation with Progressive Taxation

Author

Listed:
  • Seiya Fujisaki

    (Department of Education, Shinshu University)

  • Kazuo Mino

    (Institute of Economic Research, Kyoto University)

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.

Suggested Citation

  • Seiya Fujisaki & Kazuo Mino, 2010. "Growth and Distributional Effects of Inflation with Progressive Taxation," Economics Bulletin, AccessEcon, vol. 30(4), pages 3055-3065.
    • Handle: RePEc:ebl:ecbull:eb-10-00193
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Inflation; Progressive Income Tax; Growth; Income Distribution;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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