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Growth and Distributional Effects of Inflation with Progressive Taxation

Author

Listed:
  • Seiya, Fujisaki
  • Kazuo, Mino
Abstract
This 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 inflation tax are rather small. In contrast, fiscal distortion caused by progressive taxation yield significant impacts on growth and distribution

Suggested Citation

  • Seiya, Fujisaki & Kazuo, Mino, 2010. "Growth and Distributional Effects of Inflation with Progressive Taxation," MPRA Paper 26113, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:26113
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Inflation Tax; Progressive Income Tax; Growth; Income Distribution;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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