A Note on Taxation, Imperfect Competition and the Balanced Budget Multiplier

Hassan Molana and Thomas Moutos

Oxford Economic Papers, 1992, vol. 44, issue 1, 68-74

Abstract: This paper explores the implications of the form of taxation for the size of the balanced budget multiplier in imperfectly competitive models. The authors show that the balanced budget multiplier is positive but less than unity when there is either a lump-sum or a proportional profit tax, that it is zero when taxes are proportional to total income (wage and profit income), and that it can be negative when a proportional tax is levied on wage income alone. Copyright 1992 by Royal Economic Society.

Date: 1992
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