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A Comparative Study of Household Consumption Patterns and Optimal Commodity Tax Rates between Korea and Japan

Author

Listed:
  • Joong-Ho Kook

    (Yokohama City University)

  • Seok Gyu Choi

    (Chonbuk National University)

Abstract

This study compares consumption patterns and optimal commodity taxes between Korea and Japan using household data. We also calculate how the average optimal tax burdens in each income quintile change depending on inequality aversion. The results show that commodity groups with high spending shares in the poor (the rich) should be subsidized (taxed). The magnitudes of subsidization and/or taxation are greater in Korea than in Japan due to more unequal income distribution in Korea. Strengthening inequality aversion causes subsidization and/or taxation to increase. Our results are in line with Srinivasan (1989), Ray (1987 and 1986), and Deaton (1977). Our work contributes to related literature by presenting the optimal commodity taxes using household data of Korea and Japan, taking inequality aversion into account.

Suggested Citation

  • Joong-Ho Kook & Seok Gyu Choi, 2022. "A Comparative Study of Household Consumption Patterns and Optimal Commodity Tax Rates between Korea and Japan," Korean Economic Review, Korean Economic Association, vol. 38, pages 479-507.
    • Handle: RePEc:kea:keappr:ker-20220701-38-3-05
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    References listed on IDEAS

    as
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    2. Srinivasan, P. V., 1989. "Redistributive impact of 'optimal' commodity taxes : Evidence from Indian data," Economics Letters, Elsevier, vol. 30(4), pages 385-388, October.
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    5. Deaton, Angus, 1977. "Equity, efficiency, and the structure of indirect taxation," Journal of Public Economics, Elsevier, vol. 8(3), pages 299-312, December.
    6. Diamond, Peter A & Mirrlees, James A, 1971. "Optimal Taxation and Public Production: I--Production Efficiency," American Economic Review, American Economic Association, vol. 61(1), pages 8-27, March.
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    12. Harris, Richard G. & Mackinnon, James G., 1979. "Computing optimal tax equilibria," Journal of Public Economics, Elsevier, vol. 11(2), pages 197-212, March.
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    More about this item

    Keywords

    Consumption Pattern; Optimal Commodity Tax; Household Survey; Japan; Korea;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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