Fixed Costs, The Balanced-Budget Multiplier And Welfare
AbstractIn a two-sector model, where one of the sectors is monopolistically competitive and subject to increasing returns to scale but without love for variety, we analyze the effects of a balanced budget fiscal expansion. Such an expansion could increase the welfare of the representative individual, if elasticities of substitution in production and consumption are low. A reorganization of production takes place--increasing returns enabling a rise in real income.
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Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 171.
Length: 14 pages
Date of creation: Sep 2008
Date of revision:
Other versions of this item:
- Partha Sen, 2009. "Fixed Costs, The Balanced Budget Multiplier And Welfare," The Japanese Economic Review, Japanese Economic Association, vol. 60(3), pages 395-404.
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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