Optimal tax combination in an aging Japan

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Abstract

This paper searches for a desirable tax combination in the coming aging society. It looks at the Japanese tax and social security systems through an extended life-cycle general equilibrium simulation model and evaluates the macroeconomic and welfare effects of alternative tax policies in an aging Japan. Simulation results show that an increase in the rate of tax on consumption and a decrease in the rate of tax on interest income may be a desirable tax combination under conditions of revenue neutrality, because the combination substantially promotes capital formation and brings with it a significant improvement in social welfare.

Original languageEnglish
Pages (from-to)91-114
Number of pages24
JournalInternational Economic Journal
Volume21
Issue number1
DOIs
Publication statusPublished - Jan 1 2007

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Keywords

  • Aging population
  • Life-cycle general equilibrium model
  • Simulation analysis
  • Tax reform

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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