Fiscal policy and welfare in a small open economy with imperfect competition

Article Abstract:

Research was conducted to determine the impact of fiscal policy on a two-sector small open economy with heterogeneous types of imperfect competition in the product markets and with unionized labor markets. Results indicate that there is no general relationship between the output or real income balanced-budget multipliers and the degree of imperfect competition even with lump-sum taxes. It was found that the balanced-budget output and real income multipliers can be positive with distortionary income taxes. Also, the government undersupplies the public good relative to its Walrasian level, whenever the output multiplier is less than unity.

United States, Public Finance Activities, Fiscal Policy, Administration of Human Resource Programs (except Education, Public Health, and Veterans' Affairs Programs), Income Security, Statistical Data Included, Domestic economic assistance, Welfare economics, Monopolistic competition

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Tariff retaliation and output under a flexible exchange rate

Article Abstract:

A two-country model where both countries are identical in most economic aspects except with regard to preferences over domestic and foreign assets is analyzed to determine the impact of tariffs imposed by one country to output of the other. The model shows how tariff retaliation can lead to a decline in output of both countries. However, it must be noted that restrictions were imposed on the form of the model to keep the two-country problem tractable and hence the differential effects of a tariff war have not been considered.

Models, Economic aspects, Monetary policy, Tariffs, Production functions (Economics)

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