Fiscal stimulus in a simple macroeconomic model of monopolistic competition with firm heterogeneity
Cheng-wei Chang (),
Ching-chong Lai and
Additional contact information
Cheng-wei Chang: Tunghai University
Ting-wei Lai: National Chengchi University
The Japanese Economic Review, 2020, vol. 71, issue 3, No 5, 447-477
Abstract This paper studies the impact of a fiscal stimulus by setting up a simple monopolistic competition model with firm heterogeneity in productivity. Several main results are derived from the general equilibrium analysis. First, a rise in firm heterogeneity per se leads to decreases in aggregate output and aggregate consumption, but raises the aggregate price level when the variety-enhancing effect is sufficiently strong. Second, a fiscal expansion will bring about a positive effect on aggregate consumption, provided that the variety-enhancing effect is relatively strong or the extent of firm heterogeneity is relatively small. Finally, a fiscal expansion may raise social welfare, depending on the size of the variety-enhancing effect and the extent of firm heterogeneity.
Keywords: Monopolistic competition; Firm heterogeneity; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E30 E62 L11 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s42973-019-00025-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:jecrev:v:71:y:2020:i:3:d:10.1007_s42973-019-00025-8
Ordering information: This journal article can be ordered from
Access Statistics for this article
The Japanese Economic Review is currently edited by Michihiro Kandori
More articles in The Japanese Economic Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().