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Comparing marginal commodity tax reforms in Japan and Korea

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  • Urakawa, Kunio
  • Oshio, Takashi
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    Abstract

    We examine the impact of the marginal commodity tax reforms in Japan and Korea, using data from the official household surveys of the two countries. Based on the estimations of two demand systems (linear expenditure system (LES) and almost ideal demand system(AIDS)), we compare the marginal costs of taxing major commodity groups, examine distributive gains from tax reforms based on concentration curves, and assess the impact on poverty based on consumption dominance curves. In particular, we find that revenue-neutral marginal tax reforms incorporating a reduced tax on food and beverages are more likely to face an efficiency-equity trade-off in Korea than in Japan.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Asian Economics.

    Volume (Year): 21 (2010)
    Issue (Month): 6 (December)
    Pages: 579-592

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    Handle: RePEc:eee:asieco:v:21:y:2010:i:6:p:579-592

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    Web page: http://www.elsevier.com/locate/asieco

    Related research

    Keywords: Marginal commodity tax reform Concentration curve Consumption dominance curve;

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    1. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
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    3. Seki Asano & Takashi Fukushima, 2006. "Some Empirical Evidence On Demand System And Optimal Commodity Taxation," The Japanese Economic Review, Japanese Economic Association, vol. 57(1), pages 50-68.
    4. Makdissi, Paul & Wodon, Quentin, 2002. "Consumption dominance curves: testing for the impact of indirect tax reforms on poverty," Economics Letters, Elsevier, vol. 75(2), pages 227-235, April.
    5. Pashardes, Panos, 1993. "Bias in Estimating the Almost Ideal Demand System with the Stone Index Approximation," Economic Journal, Royal Economic Society, vol. 103(419), pages 908-15, July.
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    9. Yitzhaki, Shlomo & Slemrod, Joel, 1991. "Welfare Dominance: An Application to Commodity Taxation," American Economic Review, American Economic Association, vol. 81(3), pages 480-96, June.
    10. Alston, Julian M & Foster, Kenneth A & Green, Richard D, 1994. "Estimating Elasticities with the Linear Approximate Almost Ideal Demand System: Some Monte Carlo Results," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 351-56, May.
    11. Ray, R, 1997. "Marginal and Non Marginal Commodity Tax Reforms with Rank Two and Rank Three Demographic Demand Systems," Papers 1997-02, Tasmania - Department of Economics.
    12. Ray, Ranjan, 1997. " Issues in the Design and Reform of Commodity Taxes: Analytical Results and Empirical Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 11(4), pages 353-88, December.
    13. Jean-Yves Duclos & Paul Makdissi & Quentin Wodon, 2004. "Socially-Improving Tax Reforms," Cahiers de recherche 0401, CIRPEE.
    14. Decoster, Andre & Schokkaert, Erik, 1990. "Tax reform results with different demand systems," Journal of Public Economics, Elsevier, vol. 41(3), pages 277-296, April.
    15. Paolo Liberati, 2003. "Poverty Reducing Reforms and Subgroup Consumption Dominance Curves," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(4), pages 589-601, December.
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