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Public Investment Financed By Consumption Tax In An Aging Society

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  • MINORU WATANABE

    (Faculty of Economics and Business Administration, Kyoto Gakuen University, 1–1 Nanjo–Otani, Sogabe, Kameoka, Kyoto 621–8555, Japan)

  • YUSUKE MIYAKE

    (#x2020;Faculty of Economics, Kanto Gakuen University, 200 Huziaku–Cho Ota, Gunma, Japan)

  • MASAYA YASUOKA

    (#x2021;School of Economics, Kwansei Gakuin University, 1-155 Uegahara Ichiban-Cho, Nishinomiya, Hyogo 662-8501, Japan)

Abstract

Earlier papers have examined endogenous growth models including public investment financed by an income tax. However, public capital with such financing has not been reported. Aging societies are developing rapidly in economically developed countries. Consumption taxes to finance government expenditures are attractive to alleviate intergenerational inequality. In this paper, we demonstrate that, for public investment financing, a consumption tax is better than an income tax for income growth. If a future generation’s utility is not discounted greatly in social welfare, a consumption tax is superior. A government-set income growth rate target makes income tax financing desirable by providing more social welfare.

Suggested Citation

  • Minoru Watanabe & Yusuke Miyake & Masaya Yasuoka, 2015. "Public Investment Financed By Consumption Tax In An Aging Society," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 60(05), pages 1-17, December.
    • Handle: RePEc:wsi:serxxx:v:60:y:2015:i:05:n:s0217590815500435
    DOI: 10.1142/S0217590815500435
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