SOME EMPIRICAL EVIDENCE ON DEMAND SYSTEM * AND OPTIMAL COMMODITY TAXATION

We have two major tasks in this paper. The first is to obtain a reasonable estimate of the Japanese demand system, which includes leisure, income and commodity choices. The second is to compute and evaluate the optimal tax equilibrium. The estimation result, based on the Almost Ideal Demand System, is found to be consistent with the microeconomic theory. We evaluate the optimal commodity tax structure by calculating the equilibria under lump‐sum, optimal commodity and uniform commodity taxation schemes. The deadweight losses under uniform taxation are very small, and the optimal commodity tax rates are strikingly close to uniform.