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Two Movement Patterns under the Balanced Budget Rule |Further Results

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  • Fujio Takata

    (Graduate School of Economics, Kobe University)

Abstract

When governments levy taxes on labor income on the basis of a balanced budget rule, two steady states in an economy exist, which can cause two movement patterns, namely, indeterminacy paths and a saddle path. Many economists deal with this issue based on indivisiblelabor. On an general assumption of increasing marginal disutility of labor, that is, divisible labor, however, we demonstrate that for indeterminacy, an upper limitation concerning the share of capital in output is needed.

Suggested Citation

  • Fujio Takata, 2015. "Two Movement Patterns under the Balanced Budget Rule |Further Results," Discussion Papers 1510, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:1510
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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2015/1510.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Two movement patterns; Balanced budget rule; Labor income taxation; Divisible labor;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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