Toshihiro Ihori

Impure public goods and transfers in a three-agent model

Abstract This paper extends previous models of non-cooperative private funding of pure public goods by allowing for impure public goods. The analysis is developed in the context of international public goods. Under certain conditions the consequences of transfers on utility are paradoxical. If the preferences are divergent, a country may gain by giving a transfer, the receiver may lose, and these two phenomena may appear at the same time.

The size of government spending and the private sector's evaluation

Abstract This paper estimates the private sectors evaluation of the scale of government in two ways for the Japanese economy. First, we use a direct approach to estimating a parameter of evaluation which exploits restrictions placed on the data by the Euler equation. Second, we use an indirect approach to estimating the relationship between the optimal size and the actual size of government spending. Empirical analysis provides some evidence of a discrepancy between actual and optimal government spending, a finding that the level of government spending was regarded as too little in the 1960s, but too much in recent years.

Tax reform and intergeneration incidence

Abstract This paper presents a simple analytical framework for understanding intergeneration incidence from tax reform along the transitional growth path of life cycle economies. By analyzing the incentive effects of taxes, previous studies may give the impression that the impact on intergeneration incidence of converting an income tax to either a consumption or wage tax depends solely on the difference in such incentive effects. Within the framework of lump-sum taxation, this paper theoretically investigates under what circumstances the tax postponement effect would be relevant and how the timing of tax payments would affect intergeneration incidence.

Economic effects of land taxes in an inflationary economy.

Abstract We investigate the incidence of land taxes using a monetary overlapping generations model. The real price of land may be raised with a land tax even when the elasticity of saving with respect to the interest rate is positive. We may have the ‘crowding-out’ case, which is induced by the substitution from capital and land to money. The capital loss suffered by older generations holding land during the transition to a land tax may be partially offset by a gain in money balances as inflation abates.

Spillover effects and the terms of trade within a two-country model

This paper analyzes the long-run interdependence of national fiscal policies through changes in the terms of trade and the real rates of interest between two countries. The two-commodity structure permits the analysis of fiscal interdependence even in the case of no capital mobility, and hence more insight into welfare implications of the relationship between the degree of capital mobility and spillover effects will be obtained. We shall also investigate welfare implications of import restriction (or export promotion) policies so as to produce favorable temporal and intertemporal terms of trade effects.

International spillover effects of consumption taxation

Abstract This paper investigates the international spillover effects of a revenue-neutral increase in consumption taxes coupled with a reduction in wage taxes in a two-country open economy. Many economists feel that the consumption tax would be an improvement over the income tax. This paper provides counterexamples to the conventional wisdom. We show that conversion to a consumption tax may reduce capital accumulation and may transmit a negative externality to the rest of the countries in the world economy under certain conditions: endogenous labor supply and bequests.

Debt and Burden and Intergeneration Equity

This chapter investigates an important aspect of the debt problem, namely the proposition that debt finance burdens future generations. If so, this can be both a critique of borrowing (since it may be abused by burdening future generations with the cost of services which are enjoyed currently) and an argument for borrowing (since it may be used to secure intergeneration equity by passing on part of the cast of capital outlays to the future).

The optimal linear income tax: A diagrammatic analysis

Abstract This paper clarifies the role of the tax possibility frontier and the social indifference curve in the comparative statics analysis of the optimal linear income tax. By a mostly diagrammatic derivation of the results we confirm the conventional conjecture that the optimal marginal tax rate increases with the governments inequality aversion. On the other hand, we cannot always confirm analytically the conventional conjecture that the optimal marginal tax rate increases with the governments budgetary needs.

Land and crowding-in effects

Abstract In a recent paper, Chamley and Wright ask if the inclusion of fixed assets such as land may importantly affect the incidence of fiscal policy. This paper extends their analysis in that we explicitly investigate transitionary effects of bond- and tax-financed government spending. It is shown that we may have the temporary crowding-in effect, even in the case of bond finance. Mostly diagrammatic discussions will be intuitively appealing.

Optimal deficits in a growing economy

Abstract This paper considers the optimal size of government deficits compatible with the optimal economic growth under the assumption that government expenditures and taxes are endogenously chosen. If it is desirable to decrease the government expenditure-GNP ratio, it is also desirable to decrease the deficit-GNP ratio during the transition. We find that recent fiscal reconstruction movement in Japan may be justified from the viewpoint of the long-run macro I-S balance. This paper clarifies normative implications of the deficit as a policy variable to adjust the divergence between the exogenous savings and the desired investment.