Non-Separable Preferences do not Rule Out Aggregate Instability under Balanced-Budget Rules: A Note
Thomas Seegmuller () and
Alain Venditti ()
Working Papers from HAL
We investigate the role of non-separable preferences on the occurrence of macroeconomic instability under a balanced-budget rule where government spending is financed by a tax on labor income. Considering a one-sector neoclassical growth model with a large class of non-separable utility functions, we find that expectations-driven fluctuations easily occur when consumption and labor are Edgeworth substitutes or weak Edgeworth complements. Under these properties, an intermediate range of tax rates and a sufficiently low elasticity of intertemporal substitution in consumption lead to instability.
Keywords: labor income taxes; expectations-driven business cycles; indeterminacy; balanced-budget rule; non-separable preferences (search for similar items in EconPapers)
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01933532
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Journal Article: NONSEPARABLE PREFERENCES DO NOT RULE OUT AGGREGATE INSTABILITY UNDER BALANCED-BUDGET RULES: A NOTE (2017)
Working Paper: Nonseparable preferences do not rule out aggregate instability under balanced-budget rules: a note (2017)
Working Paper: Non-Separable Preferences do not Rule Out Aggregate Instability under Balanced-Budget Rules: A Note (2014)
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:hal:wpaper:halshs-01933532
Access Statistics for this paper
More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().