Tariff and Equilibrium Indeterminacy--(I)

Yan Zhang

MPRA Paper from University Library of Munich, Germany

Abstract: Schmitt-Grohe and Uribe (1997, henceforth SGU) prove that in a standard neoclassical growth model the fiscal increasing returns induced by the endogenous factor income tax rate (assuming that the government expenditure is exogenous) has a close correspondence with the production increasing returns in Benhabib and Farmer (1994) model. Wen and Aguiar-Conraria (2005, 2006, henceforth WAC ) extend the Benhabib-Farmer model to open economy by introducing imported foreign production factors. We prove that in a modified WAC model without increasing returns, using the tariff revenue from the imported production factor to finance the exogenous government expenditure, we can also have indeterminacy. From this perspective, factor income tax and tariff share similar channels to generate indeterminacy.

Keywords: Indeterminacy; Endogenous Tariff Rate; Small Open Economy; Exogenous Government Expenditure (search for similar items in EconPapers)
JEL-codes: F41 Q43 (search for similar items in EconPapers)
Date: 2008-04
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/8338/1/MPRA_paper_8338.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8338

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().