Dépenses publiques dans une économie à deux pays: Stackelberg versus Nash

Hubert Kempf () and Emmanuelle Taugourdeau

Annals of Economics and Statistics, 2005, issue 77, 173-185

Abstract: This paper analyses strategic fiscal policy-making within the context of the standard two-country-two-good real trade model developped by Turnovsky (1988). Introducing asymmetry between the two countries and assuming that one country acts as a Stackelberg leader relative to the other one, we compare the welfare issued from the Nash equilibrium and the welfare for each country issued from the Stackelberg equilibrium. It happens that both countries benefit from Stackelberg equilibrium with respect to the non cooperative equilibrium in the presence of strategic complementarity, because both governments reduce their public spendings. In this model, strategic interactions depend on the relative value of elasticities of substitution between goods. There may either exist strategic substituability or complementarity.

Date: 2005
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Working Paper: Dépenses publiques dans une économie à deux pays: Stackelberg versus Nash (2005)
Working Paper: Dépenses publiques dans une économie à deux pays: Stackelberg versus Nash (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2005:i:77:p:173-185

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