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The Macroeconomic Effects of Individual Commodity Tax

Author

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  • Kazuki Hiraga

    (Faculty of Economics, Keio University)

Abstract

This paper investigates the condition which raising individual consumption tax raises output and private consumption in general equilibrium model. In many of the neoclassical papers, the government expenditure decreases consumption because the government expenditure causes the negative wealth shock. On the other hand, the many empirical results are contrary. This contradiction is called "Fiscal Policy Puzzle". But, if the substitution effect of levying on additive ad-valorem commodity tax of a good is larger than the negative wealth effect of taxing and expanding government expenditure, individual tax finance can increase macroeconomic effect, in contrast to lump-sum and general commodity tax.

Suggested Citation

  • Kazuki Hiraga, 2011. "The Macroeconomic Effects of Individual Commodity Tax," Keio/Kyoto Joint Global COE Discussion Paper Series 2011-003, Keio/Kyoto Joint Global COE Program.
    • Handle: RePEc:kei:dpaper:2011-003
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    File URL: https://ies.keio.ac.jp/old_project/old/gcoe-econbus/pdf/dp/DP2011-003.pdf
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    References listed on IDEAS

    as
    1. Forni, Lorenzo & Monteforte, Libero & Sessa, Luca, 2009. "The general equilibrium effects of fiscal policy: Estimates for the Euro area," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 559-585, April.
    2. Wendy Edelberg & Martin Eichenbaum & Jonas D.M. Fisher, 1999. "Understanding the Effects of a Shock to Government Purchases," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 166-206, January.
    3. Burnside, Craig & Eichenbaum, Martin & Fisher, Jonas D. M., 2004. "Fiscal shocks and their consequences," Journal of Economic Theory, Elsevier, vol. 115(1), pages 89-117, March.
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    Cited by:

    1. Choi, Yoonseok & Hirata, Hideaki & Kim, Sunghyun Henry, 2017. "Tax reform in Japan: Is it welfare-enhancing?," Japan and the World Economy, Elsevier, vol. 42(C), pages 12-22.

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