Imperfect competition, the Keynesian cross, and optimal fiscal policy

This paper surveys the link between imperfect competition and the effects of fiscal policy on output, employment and welfare. We examine static and dynamic models, with and without entry under a variety of assumptions using a common analytical framework. We find that in general there is a robust relationship between the fiscal multiplier and welfare, the tantalizing possibility of Pareto improving fiscal policy is much more elusive. In general, the mechanisms are supply side, and so welfare improving policy, whilst possible, is not a general result. Published as Survey and Overview JEL E62

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“…Reinhorn (1998) studies optimal scal policy in a framework where public consumption directly affects consumers utility.…”

Section: Extensions and Generalisationsmentioning

confidence: 99%

Fiscal Policy under Imperfect Competition with Flexible Prices: An Overview and Survey

Costa

Dixon

2011

Economics

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show abstract

“…Reinhorn (1998) studies optimal …scal policy in a framework where public consumption directly a¤ects consumers utility.…”

Section: Extensions and Generalisationsmentioning

confidence: 99%

Fiscal Policy Under Imperfect Competition: A Survey

Costa

Dixon

2010

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper surveys the link between imperfect competition and the effects of fiscal policy on output, employment and welfare. We examine static and dynamic models, with and without entry under a variety of assumptions using a common analytical framework. We find that in general there is a robust relationship between the fiscal multiplier and welfare, the tantalizing possibility of Pareto improving fiscal policy is much more elusive. In general, the mechanisms are supply side, and so welfare improving policy, whilst possible, is not a general result. Terms of use: Documents in EconStor may

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“…Recent developments extended the basic Dixon, Mankiw and Startz (DMS) framework: e.g. Heijdra and van der Ploeg (1996), Reinhorn (1998), Torregrosa (1998) and Molana and Montagna (2000).…”

Section: Imentioning

confidence: 99%

“…11Bénassy (1991) andReinhorn (1998), amongst others, analyse 'optimal' fiscal policy in a fixedmarkup environment.…”

mentioning

confidence: 99%