Fiscal policy and entrepreneurship

Katsuya Takii

Journal of Economic Behavior & Organization, 2008, vol. 65, issue 3-4, 592-608

Abstract: This paper reexamines the effect of expansionary fiscal policy on real GDP in the presence of entrepreneurship when government expenditure partially crowds out private consumption. As government expenditure cannot reflect changes in consumers' tastes, expansionary fiscal policy weakens the social role of firms' activities to predict and adapt to idiosyncratic changes in consumers' taste. I show that expansionary fiscal policy can lower real GDP when idiosyncratic risk and the substitutability of goods are large and when firms have a strong ability to predict changes in consumer tastes. I also investigate how expansionary fiscal policy influences firms' investments in prediction ability.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167-2681(06)00198-3
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Fiscal Policy and Entrepreneurship (2004)
Working Paper: Fiscal Policy and Entrepreneurship (2004)
Working Paper: Fiscal Policy and Entrepreneurship (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:65:y:2008:i:3-4:p:592-608

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().