The Welfare Economics of Cooperative and Uncooperative Fiscal Policy

Willem Buiter and Kenneth Kletzer

No 420, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In a competitive two-country overlapping generations model with perfect capital mobility, a plan that is individually Pareto optimal (that is Pareto optimal with respect to individual preferences) can be sustained without coordination of national fiscal policies where the fiscal arsenal is restricted to lump-sum taxes and government borrowing. Cooperation is required to achieve a Pareto optimum with respect to the two utilitarian national social welfare functions. Cooperation and international side payments are required to achieve an optimum with respect to a utilitarian global social welfare functi.

Keywords: Fiscal Policy; Policy Coordination; Social Welfare (search for similar items in EconPapers)
Date: 1990-05
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Related works:
Journal Article: The welfare economics of cooperative and noncooperative fiscal policy (1991)
Working Paper: THE WELFARE ECONOMICS OF COOPERATIVE AND NONCOOPERATIVE FISCAL POLICY (1990)
Working Paper: The Welfare Economics of Cooperative and Noncooperative Fiscal Policy (1990)
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