Heterogeneous Household and the Economic Effects of Structural Consumption Tax Policy
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| Title | Heterogeneous Household and the Economic Effects of Structural Consumption Tax Policy
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| Author | Yang Yun,Li Yushuang and Chen Leyi |
| Organization | Shool of Economics and Trade, Hunan University；China Center for public finance, National School of Development, Peking University；Business School, Jiaxing University |
| Email | yangyunpaper@126.com；liyushuang2010@163.com；chenleyi1967@163.com |
| Key Words | Marginal Utility; Structural Consumption Tax; Economic Effect; Sharing Proportion |
| Abstract | Base on the marginal utility difference of different household consumption, analyze the economic effect of consumption tax policy has more solid and micro foundation. We put the heterogeneous household into a new Keynes dynamic stochastic general equilibrium model, exploring the economic effects of the consumption tax structure, explore the tax policy effect under the condition of different types of household sharing different proportion of consumption tax burden, the results showed that: (1) whether the low or high marginal utility type of household, reduce the consumption tax rate, lead to increase in their own consumption and total consumption, and expansion of macroeconomic, which is last for at least 5 quarters. The key reason is that reduce the consumption tax rate will results of consumption increased and investment decreased, then the aggregate demand increased and total supply declined, but the increase of total demand will result in increasing amount of output is more than the decline of investment results in decreasing the amount of output, so that the equilibrium output increased, which will also increases investment by accelerator effect, thus reducing the consumption tax rate will promote economic growth. (2) Compared with the low marginal utility type of household, the high marginal utility type of household has a larger increase in its own consumption and total consumption, and a larger macroeconomic expansion after the decrease of the consumption tax rate. (3) In the case of low marginal utility type of household sharing a lower proportion of consumption tax and high marginal utility type of household sharing a higher proportion of the consumption tax, reduce the rate of consumption tax can greatly promote macroeconomic expansion. |
| Serial Number | WP1382 |
| Time | 2019-06-20 |
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