6533b7d8fe1ef96bd126ab84

RESEARCH PRODUCT

Progressive consumption tax, minimum consumption, and inequality

Tien Van NguyenHoang Khieu

subject

Consumption (economics)Economics and EconometricsInequalitymedia_common.quotation_subject05 social sciencesMonetary economicsConsumption taxEmpirical research0502 economics and businessProgressive taxEconomics050207 economicsRedistribution of income and wealthFinance050205 econometrics media_common

description

Abstract In this note, we study the effects of a progressive consumption tax on wealth and consumption inequality in a model economy featuring minimum consumption. We show that increasing the lower and upper bounds of the progressive tax rate reduces wealth and consumption inequality in the long run but is not sufficient. The lower and upper bounds must not exceed the thresholds, which are decreasing functions of minimum consumption. The result is useful for empirical studies of the redistribution of wealth and consumption.

yearjournalcountryeditionlanguage
2020-12-01Economics Letters
https://doi.org/10.1016/j.econlet.2020.109653