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Macroeconomic Effect of Consumption Tax on ”Dynamic” and ”Myopic” Agents

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  • Fujisaki, Seiya

Abstract

We analyze the effect of consumption tax on the economy with heterogeneous agents, that is, with a dynamic capitalist and a myopic worker. We suppose that the revenue which is raised for government expenditure and is included in the worker’s utility is only from consumption tax and that the constant tax rate for each agent may be different. We theoretically find that it is beneficial for all agents if the capitalist as the dynamic agent becomes more patient and increases his ”spirit of capitalism”, whereas controlling tax rates faces a trade-off between the economic scale and the difference of agent, although heterogeneous taxes may have different effects to some extent.

Suggested Citation

  • Fujisaki, Seiya, 2016. "Macroeconomic Effect of Consumption Tax on ”Dynamic” and ”Myopic” Agents," MPRA Paper 73500, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:73500
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    References listed on IDEAS

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    5. Kamiguchi, Akira & Tamai, Toshiki, 2011. "Can productive government spending be a source of equilibrium indeterminacy?," Economic Modelling, Elsevier, vol. 28(3), pages 1335-1340, May.
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    9. T. Tamai, 2008. "Optimal fiscal policy in an endogenous growth model with public capital: a note," Journal of Economics, Springer, vol. 93(1), pages 81-93, February.
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    More about this item

    Keywords

    government expenditure in utility; consumption tax; heterogeneous agents; dynamic and myopic;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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