Abstract
In a monopolistic competition macromodel with endogenous market structure, the fiscal multiplier is shown to consist of two components. One component depicts the response of output to a fiscal expansion through the conventional channels that disregard the role of market imperfections and a second one captures the effect of both firms’ market power and the policy induced change in the market structure. The latter effect – which is missing from the existing studies – is shown to be quite crucial in raising the fiscal multiplier even above unity, and also in improving consumers’ welfare when the labour market is competitive.
| Original language | English |
|---|---|
| Pages (from-to) | 147-164 |
| Journal | Scandinavian Journal of Economics |
| Volume | 103 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Mar 2001 |
Keywords
- Imperfect competition
- Monopoly power
- Fiscal multiplier
- Welfare
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Dive into the research topics of 'Market structure and fiscal policy effectiveness'. Together they form a unique fingerprint.Research output
- 8 Citations
- 1 Discussion paper
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Dundee Discussion Papers in Economics 104: Market structure and fiscal policy effectiveness
Molana, H. & Zhang, J., 1999, University of Dundee, (Dundee Discussion Papers in Economics; no. 104).Research output: Working paper/Preprint › Discussion paper
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