The Effects of a Consumption Tax on Effective Demand Under Stagnation

18 Pages Posted: 30 Aug 2003

Abstract

This paper investigates the effects of a consumption tax on effective demand under stagnation. The existing work shows that a consumption tax does not influence effective demand in the case of a homogeneous household under stagnation. In this paper there are two types of household. One is the richer household, whose level of total assets is relatively high. The other is the poorer household, which owns fewer total assets. In a lump-sum transfer, when the ratio of the poorer household to the total population is large (small), imposing a consumption tax decreases (increases) effective demand.

Suggested Citation

Matsuzaki, Daisuke, The Effects of a Consumption Tax on Effective Demand Under Stagnation. Available at SSRN: https://ssrn.com/abstract=411123

Daisuke Matsuzaki (Contact Author)

Toyo University

5-28-20 Hakusan
Bunkyo-ku
Tokyo 112-8606, Tokyo 1128606
Japan

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