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Fiscal stimulus in a model with endogenous firm entry

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  • Totzek, Alexander
  • Winkler, Roland C.

Abstract

This paper explores different fiscal stimuli within a business cycle model with an endogenous number of firms. We demonstrate that a changing number of firms is a crucial dimension for evaluating fiscal policy since it accelerates the impacts of fiscal policy. In the presence of demand stimuli fiscal multipliers are small and the number of firms may decline, in particular under distortionary tax financing. Policies that disburden private agents from income taxes, on the other hand, are effective in boosting economic activity and new firm creation. --

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Bibliographic Info

Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2010,05.

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Date of creation: 2010
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Handle: RePEc:zbw:cauewp:201005

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Keywords: Fiscal Multipliers; Firm Entry; Product Variety;

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Cited by:
  1. Totzek, Alexander, 2011. "Banks, oligopolistic competition, and the business cycle: A new financial accelerator approach," Economics Working Papers 2011,02, Christian-Albrechts-University of Kiel, Department of Economics.

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