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Should Fiscal Policy Be Di.erent in a Non-Competitive Framework?

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Abstract

This paper studies if imperfections in the labor market justify a diferent fiscal policy. We present a dynamic general equilibrium model with a Ramsey planner deciding about public spending, labor taxes and debt. Two diferent labor market setups are considered. First we assume a competitive labor market and then we introduce a union with monopoly power. Both models reach the same conclusion as regards the cyclical properties of the optimal policy: it is not optimal to implement a countercyclical fiscal policy. We also find that government spending should be larger under perfect competition. These main results arise both under complete and incomplete markets for the debt.

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Bibliographic Info

Paper provided by Centro de Estudios Andaluces in its series Economic Working Papers at Centro de Estudios Andaluces with number E2002/11.

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Length: 35 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:cea:doctra:e2002_11

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Keywords: Ramsey problem; labor market imperfections; incomplete markets;

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  23. Gorostiaga Alonso, Miren Arantzazu, 1999. "Should Fiscal Policy be different in a Non-Competitive Framework?," DFAEII Working Papers 2002-28, University of the Basque Country - Department of Foundations of Economic Analysis II.
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Cited by:
  1. Arantza Gorostiaga, 2004. "Optimal Fiscal Policy with Rationing in the Labor Market," Economic Working Papers at Centro de Estudios Andaluces E2004/10, Centro de Estudios Andaluces.
  2. Albert Marcet & Andrew Scott, 2003. "Debt and Deficit Fluctuations and the Structure of Bond Markets," Working Papers 171, Barcelona Graduate School of Economics.
  3. Sunghyun Henry Kim & Jinill Kim, 2003. "Welfare Effects of Tax Policy in Open Economies: Stabilization and Cooperation," Computing in Economics and Finance 2003 259, Society for Computational Economics.
  4. Gorostiaga, Arantza & Rubio-Ramirez, Juan F., 2007. "Optimal minimum wage in a competitive economy: An alternative modelling approach," Economic Modelling, Elsevier, vol. 24(5), pages 778-796, September.
  5. Cassou, Steven P. & Hamilton, Stephen F. & Gorostiaga Alonso, Miren Arantzazu & Gutiérrez Huerta, María José, 2006. "Second-best tax policy in a growing economy with externalities," DFAEII Working Papers 2006-03, University of the Basque Country - Department of Foundations of Economic Analysis II.
  6. Gorostiaga Alonso, Miren Arantzazu, 1999. "Optimal Fiscal Policy with Rationing in the Labor Market," DFAEII Working Papers 2002-29, University of the Basque Country - Department of Foundations of Economic Analysis II.
  7. Arantza Gorostiaga & Juan Francisco Rubio-Ramírez, 2004. "Optimal minimum wage in a competitive economy," Working Paper 2004-30, Federal Reserve Bank of Atlanta.
  8. Antonio Morales & Pablo Brañas Garza, 2003. "Computational Errors in Guessing Games1," Economic Working Papers at Centro de Estudios Andaluces E2003/11, Centro de Estudios Andaluces.
  9. Sonedda, Daniela, 2006. "Macroeconomics effects of progressive taxation in a unionized economy," Economic Modelling, Elsevier, vol. 23(1), pages 110-130, January.
  10. Gorostiaga Alonso, Miren Arantzazu & Cassou, Steven P., 2007. "Optimal fiscal policy in a multisector model with minimum expenditure requirements," DFAEII Working Papers 2007-01, University of the Basque Country - Department of Foundations of Economic Analysis II.

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