FIXED COSTS,THE BALANCED BUDGET MULTIPLIER AND WELFARE* |
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Authors: | PARTHA SEN |
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Affiliation: | Delhi School of Economics |
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Abstract: | In a two‐sector model, where one of the sectors is monopolistically competitive and subject to increasing returns to scale but without love for variety, we analyse the effects of a balanced budget fiscal expansion. Such an expansion could increase the welfare of the representative individual, if elasticities of substitution in production and consumption are low. A reorganization of production takes place—increasing returns enabling a rise in real income. |
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Keywords: | E1 E2 L1 |
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