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Fiscal Policy and Entrepreneurship

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  • Katsuya Takii

Abstract

This paper reexamines the effect of expansionary fiscal policy on the real GDP in the presense of entrepreneurship - firms' activities to predict and react to changes in consumers' taste. The existence of partial crowding out in this paper generates a trade off between private consumption and government expenditure. Since goverment expenditure can not reflect changes in consumers' taste, it reduces the importance of firms' ability to process local information for predicting changes in consumers' taste. It is shown that expansionary fiscal policy can lower the real GDP when idiosyncratic risk and the substitutability of goods are large, and firms have great ability to predict the changes. This paper also shows that expansionary fiscal policy discourgages investment in prediction ability in the short run, but has no effect in the long run.

Suggested Citation

  • Katsuya Takii, 2004. "Fiscal Policy and Entrepreneurship," Econometric Society 2004 North American Summer Meetings 320, Econometric Society.
    • Handle: RePEc:ecm:nasm04:320
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    References listed on IDEAS

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    1. Katsuya Takii, 2011. "Entrepreneurial Efficiency: Theory," The Japanese Economic Review, Japanese Economic Association, vol. 62(2), pages 196-214, June.
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    11. Katsuya Takii, 2004. "The Value of Adaptability," Industrial Organization 0406004, University Library of Munich, Germany.
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    17. Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 265-294, April.
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    Cited by:

    1. Katsuya Takii, 2007. "The Persistence of Differences in Productivity, Wages, Skill Mixes and Profits Between Firms," Discussion Papers in Economics and Business 07-10, Osaka University, Graduate School of Economics.
    2. Hernán Herrera-Echeverri & Jerry Haar & Alexander Arrieta Jiménez & Manuel Araújo Zapata, 2015. "Devaluation, Competitiveness And New Business Formation In Emerging Countries," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 20(03), pages 1-22, September.
    3. Sasaki, Masaru & Takii, Katsuya & Wan, Junmin, 2012. "Horizontal Transfer and Promotion: New Evidence and an Interpretation from the Perspective of Task-Specific Human Capital," IZA Discussion Papers 6486, Institute of Labor Economics (IZA).
    4. Katsuya Takii, 2009. "Entrepreneurial competition and its impact on the aggregate economy," Journal of Economics, Springer, vol. 97(1), pages 1-18, May.
    5. Maria Minniti, 2008. "The Role of Government Policy on Entrepreneurial Activity: Productive, Unproductive, or Destructive?," Entrepreneurship Theory and Practice, , vol. 32(5), pages 779-790, September.

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    More about this item

    Keywords

    Fiscal Policy; Entrepreneurship; Local Information;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics

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