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The Macroeconomic Effects of Individual Commodity Tax

  • Kazuki Hiraga

    (Faculty of Economics, Keio University)

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    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.

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    File URL: http://ies.keio.ac.jp/old_project/old/gcoe-econbus/pdf/dp/DP2011-003.pdf
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    Paper provided by Keio/Kyoto Joint Global COE Program in its series Keio/Kyoto Joint Global COE Discussion Paper Series with number 2011-003.

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    Length: 30 pages
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:kei:dpaper:2011-003
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    Web page: http://ies.keio.ac.jp/old_project/old/gcoe-econbus/
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    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.
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