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Fiscal policy under imperfect competition: A survey

  • Costa, Luís F.
  • Dixon, Huw David

This paper surveys the link between imperfect competition and the effects of fiscal policy on output, employment and welfare. We examine static and dynamic models, with and without entry under a variety of assumptions using a common analytical framework. We find that in general there is a robust relationship between the fiscal multiplier and welfare, the tantalizing possibility of Pareto improving fiscal policy is much more elusive. In general, the mechanisms are supply side, and so welfare improving policy, whilst possible, is not a general result.

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Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2010-14.

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Date of creation: 2010
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Handle: RePEc:zbw:ifwedp:201014
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