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Seoul Journal of Economics - Vol. 31 , No. 4
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[ Article ]
Seoul Journal of Economics - Vol. 31, No. 4, pp. 355-375
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 30 Nov 2018
Received 18 Oct 2017 Revised 29 Mar 2018 Accepted 04 Oct 2018

The Effect of the Consumption Tax on Economic Growth and Welfare with Money and Endogenous Fertility
Akihiko Kaneko ; Daisuke Matsuzaki
Akihiko Kaneko, Faculty of Political Science and Economics, Waseda University, 1-6-1 Nishi-Waseda, Shinjuku-ku, Tokyo 169-8050, Japan, Tel: +81-3-3208-1197 (akaneko@waseda.jp)
Daisuke Matsuzaki, Corresponding author, Faculty of Economics, Toyo University, 5-28-20, Hakusan, Bunkyou-ku, Tokyo 112-8606, Japan, Tel: +81-3-3945-4833 (matsuzaki@toyo.jp)

Funding Information ▼

JEL Classification: E60, J13, O42

Abstract

In this study, we examine the effect of consumption tax on the growth rate and welfare in a model with money and endogenous fertility. First, we show that an increase in consumption tax always reduces the economic growth rate but has an ambiguous effect on welfare. We show a numerical example based on Japanese data and demonstrate the likelihood that increasing the consumption tax decreases welfare. We also compare the effects of consumption tax financing and monetary financing on growth rate and welfare.

Keywords: Consumption tax, Endogenous fertility, Endogenous growth, Money-in-the-utility-function model
Acknowledgments

The authors wish to thank the participants of the 25th Pacific Conference of the RSAI in Taiwan. This work was supported in part by a Waseda University Grant for Special Research Projects [No. 2017K-012] (Akihiko Kaneko); JSPS KAKENHI Grant Numbers No. JP17K03727 (Akihiko Kaneko), and No. JP16K03664 (Daisuke Matsuzaki). The authors are solely responsible for any errors.

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