Research On The Economic Effect Of Structural Tax Policy At The Condition Of Heterogeneous Economic Agents

Ever since China's economy stepped into the“new normal" in 2012,the pressure of decline in economic growth rate has been enlarged.Traditional forms of expanding fiscal expenditure to adjust the economic structure and promote economic growth worked weakly day by day and might even trigger a serious debt crisis.Under this situation,the central financial and economic leading group proposed the structural reform of supply side,to improve the quality and efficiency of the supply system,and to enhance the driving force for sustained economic growth in November 2015.The structural tax cut is an important part of the structural reform of supply side.In order to achieve sustained and stable economic growth,the government has vigorously implemented structural tax cuts,seeking a new impetus for economic growth in the future by implementing the”micro stimulation“and adjusting the economic structure.Thus,it is worth discussing and analyzing that the effect of structural tax policy.In fact,responses to the tax policy among different types of households and firms in economic system have been varied thus far.Therefore,this paper discusses and analyzes the macroeconomic effects of structural tax policy at the condition of heterogeneous economic agents,expecting to expand the macroeconomic theory,and provide corresponding policy implications.In the economic system?the household and the firm usually show heterogeneous characteristics,which is reflected by the difference of the marginal utility of the family consumption and return to scale of firm and we defines heterogeneous households and firms base on this characteristics.Suppose all households are divided into two categories:low marginal utility type household(high income household)and high marginal utility type household(low income household);firms are also divided into two categories:constant returns to scale type firm and increasing returns to scale type firm.Base on this category,we analyzed the economic effect of structural tax policy.It should be pointed out that the existing literature divides tax into consumption tax,capital income tax and labor income tax,and the structural relationship of these three are involved in structural tax policy.In contrast,the structural tax policy discussed in our research is a structure relationship of the same tax f-or heterogeneous economic agents.For example,the structural consumption tax refers to the structure relationship between the low marginal utility type household and high marginal utility type household's consumption tax.Heterogeneous households are introduced into a new Keynes DSGE model to study the economic effects of different types of households with the changes of the consumption tax rate.After completing the establishment of the model of the economic effects of the structural consumption tax policy under the condition of heterogeneous households,we calibrate,estimate and test the applicability of the model,and results shows that this model is well match with China's macroeconomic data,which can better explain the macro-economic phenomenon.Then we analyze the economic affect of structural consumption tax policy and found that:(1)Either low or high marginal utility type households.under the motivation of the pursuit of the family utility maximization,decreasing the consumption tax rate will lead to increase of household's optimal consumption,which will last for at least 5 quarters,this will result in the increase of the total consumption and therefore the macro economy will expand;(2)Compared to the low marginal utility type household(high income households),because of the higher of marginal utility of consumption,after reducing the same amount of consumption tax rate the high marginal utility type household(low income household)self's consumption will increase greater magnitude,resulting in the great increase of total consumption,and the macro economy expands even more sharply.(3)Supposes that the economy is only subject to consumption tax policy shocks,the variance contribution of the low marginal utility type household and the high marginal utility type household's consumption tax rate cuts to the total consumption changes are 1.85%and 98.15%respectively.The impact of increasing structural consumption tax rate on the macro economy is the opposite.Based on the difference returns to scale,the DSGE model including the heterogeneous firms is constructed,and the economic effects of different types of firm with the change of capital income tax rate are analyzed.Next,the parameters of the model are calibrated and estimated,and the applicability of the model is tested.Results show that the model can match well with the actual economic situation.Then,we simulate the economic effects of the structural capital income tax policy under the condition of heterogeneous firms.Results show that:(1)Whether the constant returns to scale type firm or the increasing returns to scale type firm,under the motivation of the pursuit of the firm profit maximization,reducing capital income tax rate will lead to increase of firm's output thus increasing the total output,which will last for 10 quarters,accompanied with macro economic expansion.(2)Compared to the constant return to scale type firm,with capital income tax rate decreasing in the same unit,at the effect of higher returns to scale,the increasing returns to scale type firm's output I ncrease even more,resulting in more substantial increase of the total output,and sharper macroeconomic expansion.(3)Suppose the economy is only subject to tax policy shocks,the variance contribution of the constant returns to scale type firm and the increasing returns to scale type firm's capital income tax rate reduces to total output changes are 1.44%and 23.67%respectively.Correspondingly,the effect of the structural increases of the capital income tax rates on macroeconomic is reversed.In the DSGE model of the effect of the structural tax policy,the economic effect of the structural tax policy is studied in the case of heterogeneous households and firms.Then the parameters of the model are calibrated by using quarterly macroeconomic data to estimate and test the applicability of the model.Results show that:(1)The conclusion that total consumption falls more rapidly with the increases of consumption tax rate of high marginal utility type household(low income household)is robust.In addition,with the augment of capital income tax rate of the increasing returns to scale type firm,greater increase of total output is also robust.(2)Compared to the combination of the low marginal utility type household and constant returns to scale type firm with the increase of tax rate,the combination of the high marginal utility type household and the increasing returns to scale type firm's tax rate increases will lead to total output,total consumption and inflation rate to fall even more sharply,which means that the effect of the structural tax policy is more obvious.(3)Assuming the economy is only influenced by tax policy shocks,compared to the low marginal utility type household and the constant returns to scale type firm's tax rate increases,the high marginal utility type household and the increasing returns to scale type firm with the increase of tax rate make a bigger variance contribution to the total consumption and total output changes.In addition,the policy coordination and policy expectations were also considered in the analysis of the economic eff-ect of structural tax policy model,and analyze its influence on the regulation macro-economic of structural tax policy respectively.Results show that:(1)With the coordination of structural increase tax policy and government spending on weak pegged at inflation adjusted policy,total consumption declines more gently while inflation fell even more sharply,which means it will be more effective depressed inflation at this time.(2)With the coordination of interest rates strongly pegged at inflation adjusted and structural increase tax rate,the total consumption,total output,total labor decreased even less with equal decline in inflation,and economic operation is more stable.(3)Compared to the non expected tax policy,increasing the structural tax rate results in more significant drop of total consumption,total output and inflation at the condition of a single period and the multi-periods of the expectation,which means the expectation of tax policy enlarges the structural tax policy effect.Therefore,there is a need to strengthen the management of tax policy expectations,and guide expectations reasonably.Different periods of economic growth rate means different structural tax policy regulation and different tasks,and there is a need to adjust tax policy according to the specific situation.We put forward corresponding policy suggestions during the period of low speed economic growth,the period of medium speed economic growth,and the period of rapid speed economic growth.