Okayama Economic Review
Published by the Economic Association of Okayama University


This paper examines the effects of a progressive labor income tax scheme and a progressive consumption tax scheme on capital stock and on intragenerational wealth distribution in Japan, the society with an aging population. To analyze the problem, we adopt a simulation approach for an extended life-cycle general equilibrium model of overlapping generations. As a progressive tax is likely to mitigate the inequality of resource distribution, it is crucial to allow for the existence of heterogeneous labor. This is incorporated by assuming that each cohort has three representative individuals with equal tastes but unequal annual labor endowments, corresponding to three income classes, namely, low, middle, and high income classes. As the simulation results indicate, a progressive labor income tax shrinks the inequality in the distribution of wealth, while a progressive consumption tax furthers slightly.
論説 (Article)