Profits, Markups and Entry: Fiscal Policy in an Open Economy

Arbeitspapier

In this paper we develop a general model of an imperfectly competitive small open economy. There is a traded and non-traded sector, whose outputs are combined in order to produce a single final good that can be either consumed or invested. We make general assumptions about preferences and technology, and analyze the impact of fiscal policy on the economy. We find that the fiscal multiplier is between zero and one, and provide sufficient conditions for it to be increasing in the degree of imperfect competition. We also are able to compare the multiplier under free-entry and with a fixed number of firms and welfare. A simple graphical representation of the model is developed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 550

Classification and Topics

• Classification: Wirtschaft ; Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy: General (includes Measurement and Data) ; Fiscal Policy ; Macroeconomic Aspects of International Trade and Finance: General
• Subject: Imperfect competition ; open economy ; fiscal policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Coto-Martínez, Javier ; Dixon, Huw D.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/75762
• Last update: 10.03.2025, 11:44 AM CET