The Korean Economic Review
A Comparative Study of Household Consumption Patterns and Optimal Commodity Tax Rates between Korea and Japan
Joong-Ho Kook (Yokohama City University) and Seok Gyu Choi (Chonbuk National University)Year 2022Vol. 38No. 3
AbstractThis study compares consumption patterns and optimal commodity taxes between Korea and Japan using household data. We also calculate how the average optimal tax burdens in each income quintile change depending on inequality aversion. The results show that commodity groups with high spending shares in the poor (the rich) should be subsidized (taxed). The magnitudes of subsidization and/or taxation are greater in Korea than in Japan due to more unequal income distribution in Korea. Strengthening inequality aversion causes subsidization and/or taxation to increase. Our results are in line with Srinivasan (1989), Ray (1987 and 1986), and Deaton (1977). Our work contributes to related literature by presenting the optimal commodity taxes using household data of Korea and Japan, taking inequality aversion into account.