FIXED COSTS, THE BALANCED BUDGET MULTIPLIER AND WELFARE*

Partha Sen

The Japanese Economic Review, 2009, vol. 60, issue 3, 395-404

Abstract: In a two‐sector model, where one of the sectors is monopolistically competitive and subject to increasing returns to scale but without love for variety, we analyse the effects of a balanced budget fiscal expansion. Such an expansion could increase the welfare of the representative individual, if elasticities of substitution in production and consumption are low. A reorganization of production takes place—increasing returns enabling a rise in real income.

Date: 2009
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https://doi.org/10.1111/j.1468-5876.2008.00459.x

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Working Paper: FIXED COSTS, THE BALANCED-BUDGET MULTIPLIER AND WELFARE (2008)
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