Premium
Balanced‐budget rule, distortionary taxes and aggregate stability
Author(s) -
Saïdi Aurélien W.
Publication year - 2011
Publication title -
international journal of economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 11
eISSN - 1742-7363
pISSN - 1742-7355
DOI - 10.1111/j.1742-7363.2011.00165.x
Subject(s) - economics , determinacy , indeterminacy (philosophy) , returns to scale , capital (architecture) , stock (firearms) , monetary economics , balanced budget , competitive equilibrium , aggregate (composite) , microeconomics , mathematical economics , econometrics , production (economics) , mathematics , mechanical engineering , mathematical analysis , physics , materials science , archaeology , quantum mechanics , politics , political science , law , engineering , composite material , history
It has been established under perfect competition and constant returns‐to‐scale that a one‐sector growth model may exhibit multiple stationary equilibria and local indeterminacy when income tax rates are endogenously determined by a balanced‐budget rule while government expenditures are fixed. The present paper shows that determinacy of the equilibrium trajectory is, however, generically preserved for a non‐empty range of initial values of the capital stock.