Inequality, imperfect competition and fiscal policy

Arbeitspapier

We build a New Keynesian model with imperfectly competitive goods markets and heterogeneous people and examine their impact on fiscal multipliers and on the net increase in output and expenditure caused by fiscal policies, using the balanced budget multiplier. Results show that in highly unequal economies the maximum net increase in output and expenditure comes when governments increase expenditure and tax high-income workers because the adverse effects on the economy are smaller. However, when inequality decreases and enough people belong to the high-income group governments should fund expenditure by taxing low-income people. Finally, inequality also affects the welfare effects of fiscal policies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: MPRA Paper ; No. 87820

Classification and Topics

• Classification: Wirtschaft ; Equity, Justice, Inequality, and Other Normative Criteria and Measurement ; General Aggregative Models: Keynes; Keynesian; Post-Keynesian ; Fiscal Policy
• Subject: Income inequality ; Fiscal multiplier ; Public Expenditure ; Taxation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pavlos Balamatsias
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität (LMU)
• (where): Munich
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/182243
• Last update: 10.03.2025, 11:42 AM CET