Indeterminacy, Stabilization Policy and Returns to Scale: A Re-Investigation

Nicholas Sim

The B.E. Journal of Macroeconomics, 2005, vol. 5, issue 1, 26

Abstract: This paper examines whether taxation is effective in eliminating sunspot fluctuations by considering two separate model economies by which indeterminacy occurs for empirically plausible specification of the model parameters. In the first model where production exhibits social increasing returns to scale and private constant returns to scale, I find that i) labor income tax alone, even if the tax schedule is flat, is effective; ii) taxes on labor and capital income would be more effective with increased progressivity; iii) at each average tax rate, labor income tax is more effective than capital income tax. However, in the second model where production exhibits social constant returns to scale and private decreasing returns to scale, I find that labor and capital income taxes at all progressivity levels are ineffective in removing sunspot fluctuations.

Keywords: Indeterminacy; Stabilization policy; Returns to scale; Two-sector (search for similar items in EconPapers)
Date: 2005
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2202/1534-6005.1251 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
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:bpj:bejmac:v:contributions.5:y:2005:i:1:n:3

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejm/html

DOI: 10.2202/1534-6005.1251

Access Statistics for this article

The B.E. Journal of Macroeconomics is currently edited by Arpad Abraham and Tiago Cavalcanti

More articles in The B.E. Journal of Macroeconomics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().