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ERIC Number: EJ781640
Record Type: Journal
Publication Date: 2007
Pages: 11
Abstractor: Author
Reference Count: 2
ISSN: ISSN-0022-0485
The Long-Run Effect of a Tax-Rebate Program
Wang, Yuntong; Kasper, Hirschel
Journal of Economic Education, v38 n4 p435-445 Fall 2007
In each period of a dynamic tax-rebate program, a (fixed) quantity tax is imposed on each unit of a given good, and the tax revenue is rebated back to the consumer in the next period. The program lasts for infinite number of periods. The author considers a representative consumer's dynamic consumption behavior, the long-run steady-state consumption, and the consumer's welfare. Under the standard continuity and strict convexity assumptions on the consumer's preferences, he shows that the tax strictly reduces the consumption of the good in each period as well as in the steady state, and the consumer is strictly worse off. He also provides numerical analysis when the consumer has the quasilinear or the Cobb-Douglas utility functions. (Contains 4 figures and 8 notes.)
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Publication Type: Journal Articles; Reports - Descriptive
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A