Growth and Distributional Effects of Inflation with Progressive Taxation
AbstractThis 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.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 30 (2010)
Issue (Month): 4 ()
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Inflation; Progressive Income Tax; Growth; Income Distribution;
Other versions of this item:
- Seiya, Fujisaki & Kazuo, Mino, 2010. "Growth and Distributional Effects of Inflation with Progressive Taxation," MPRA Paper 26113, University Library of Munich, Germany.
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
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