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How Progressive Is the Most Popular Tax Scheme? The Case of South Korea

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  • LIM, Taejun
  • KIM, Aram

Abstract

Using a structural model and the 2018 Korean economy data, we show that even the individuals with relatively low income do not always prefer greater tax progressivity due to reduced economic efficiency (i.e., decrease in aggregate output and consumption) it accompanies. Hence, the counterfactual analyses reveal that the most popularly supported tax and redistributionpolicy inthis economy does not uphold the optimal degree of progressivity for social welfare maximization and sustains about 0.31 of after-tax Gini.

Suggested Citation

  • LIM, Taejun & KIM, Aram, 2023. "How Progressive Is the Most Popular Tax Scheme? The Case of South Korea," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 64(1), pages 1-17, June.
    • Handle: RePEc:hit:hitjec:v:64:y:2023:i:1:p:1-17
    DOI: 10.15057/hje.2023001
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    References listed on IDEAS

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    More about this item

    Keywords

    Tax Progressivity; Optimal Tax; Political Economy; Redistribution;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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