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Perfect Competition and the Keynesian Cross:Revisiting Tobin

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  • Partha Sen

    (Delhi School of Economics)

Abstract

I look at an exogenous decrease in the desire to save in a two-sector-two-period overlapping generations model, where the consumption good is capital-intensive and the elasticities of substitution in production are "small". It is shown that there is a Keynesian-type multiplier at work, even though the model is a competitive one with full employment (and inelastic labour supply). It is reminiscent of Tobin (1975) who had shown thirty years ago that Keynesian results could be obtained with (short run) Marshallian dynamics (albeit in an ad-hoc model).

Suggested Citation

  • Partha Sen, 2005. "Perfect Competition and the Keynesian Cross:Revisiting Tobin," Working papers 135, Centre for Development Economics, Delhi School of Economics.
  • Handle: RePEc:cde:cdewps:135
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    References listed on IDEAS

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    More about this item

    Keywords

    Overlapping Generations; Two-sector Models; Multiplier; Keynesian Cross.;

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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