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Optimal fiscal policy in a multisector model with minimum expenditure requirements

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  • Cassou, Steven P.
  • Gorostiaga Alonso, Miren Arantzazu

Abstract

This paper investigates optimal fiscal policy in a static multisector model. A Ramsey type planner chooses tax rates on each good type as well as spending levels on each good type subject to an exogenous total expenditure constraint and requirements that some minimum amount of spending be undertaken in each sector. It is shown that optimal policy does not equally spend in each sector but instead results in one of the minimum expenditure constraints binding.

Suggested Citation

  • Cassou, Steven P. & Gorostiaga Alonso, Miren Arantzazu, 2007. "Optimal fiscal policy in a multisector model with minimum expenditure requirements," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    • Handle: RePEc:ehu:dfaeii:6873
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    References listed on IDEAS

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