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Seiya Fujisaki and Kazuo Mino
''Growth and Distributional Effects of Inflation with Progressive Taxation''
( 2010, Vol. 30 No.4 )
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 money growth are rather small. In contrast, fiscal distortion caused by progressive taxation yield significant impacts on growth and distribution.
Keywords: Inflation, Progressive Income Tax, Growth, Income Distribution
JEL: E4 - Money and Interest Rates: General
H2 - Taxation, Subsidies, and Revenue: General
Manuscript Received : Mar 20 2010 Manuscript Accepted : Nov 18 2010

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