Two Movement Patterns under the Balanced Budget Rule |Further Results

Fujio Takata ()
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Fujio Takata: Graduate School of Economics, Kobe University

No 1510, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: When governments levy taxes on labor income on the basis of a balanced budget rule, two steady states in an economy exist, which can cause two movement patterns, namely, indeterminacy paths and a saddle path. Many economists deal with this issue based on indivisiblelabor. On an general assumption of increasing marginal disutility of labor, that is, divisible labor, however, we demonstrate that for indeterminacy, an upper limitation concerning the share of capital in output is needed.

Keywords: Two movement patterns; Balanced budget rule; Labor income taxation; Divisible labor (search for similar items in EconPapers)
JEL-codes: E13 E21 E32 E62 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2015-02
New Economics Papers: this item is included in nep-mac and nep-mfd
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