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Information Asymmetry in SME Credit Guarantee Schemes: Evidence from Japan

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  • KOBAYASHI Keiichiro

Abstract

In this paper, I demonstrate that the Laffer curve for a consumption tax increases monotonically and unboundedly in a closed economy in which the supply of one factor of production is fixed. Therefore, in this economy, an arbitrary amount of government debt can be made sustainable by choosing an appropriate tax rate. Tax revenue unboundedly increases due to a matter of accounting—tax revenue is transferred back to households as the redemption of government debt, which is used for the consumption, and is then taxed again.

Suggested Citation

  • KOBAYASHI Keiichiro, 2014. "Information Asymmetry in SME Credit Guarantee Schemes: Evidence from Japan," Discussion papers 14043, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:14043
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    File URL: https://www.rieti.go.jp/jp/publications/dp/14e043.pdf
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    1. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
    2. Nutahara, Kengo, 2015. "Laffer curves in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 36(C), pages 56-72.
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