Can productive government spending be a source of equilibrium indeterminacy?

Akira Kamiguchi and Toshiki Tamai

Economic Modelling, 2011, vol. 28, issue 3, 1335-1340

Abstract: This paper presents an examination of the interaction between indeterminacy and productive government spending financed by taxes in a one-sector growth model. In the paper, we show that the possibility of indeterminacy is positively affected by dependence on income tax financing and is negatively affected by consumption tax financing. Under balanced budget rules, a key determinant for indeterminacy is a revenue source for providing public services (i.e. income tax financing) rather than the presence of productive government spending.

Keywords: Indeterminacy; Tax-financing; Public; input (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:28:y:2011:i:3:p:1335-1340

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