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Fiscal stimulus in a model with endogenous firm entry

  • Totzek, Alexander
  • Winkler, Roland C.

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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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
Contact details of provider: Postal: D-24098 Kiel,Wilhelm-Seelig-Platz 1
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Web page: http://www.wiso.uni-kiel.de/econ/

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  17. Vivien LEWIS & Céline POILLY, 2011. "Firm Entry, Inflation and the Monetary Transmission Mechanism," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  18. Eric M. Leeper & Todd B. Walker & Shu-Chun Susan Yang, 2009. "Government Investment and Fiscal Stimulus in the Short and Long Runs," NBER Working Papers 15153, National Bureau of Economic Research, Inc.
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