| Abstract | There is somewhat a consensus on china inflation: the mis-allocation of resource coming from the distorted institution contributes the endogenous inflation pressure, whereas the accommodative monetary policy transfers the inflation pressure into reality. However, there isn’t adequate discussion on the institutional pressure. The purpose of this paper is to modeling the institution inflation pressure in china nowadays, and to clarify the precondition of the institutional inflation pressure. We find that the propensity of higher tax is the source of inflation in china. We define the part of tax exceed the norm tax as inflation tax. The existence of inflation tax depends on the productivity gap between state sector and private sector. That is to say, when the productivity of state sector is far below the private sector, the inflation tax is not prone to emerge; when the productivity of state sector is close to private sector, the inflation tax is more likely to happen. Therefore, we propose to mitigate Chinese institutional inflation pressure by strength the private sector and boost the productivity of private sector. |