Fiscal stimulus in a model with endogenous firm entry

Alexander Totzek and Roland Winkler ()

No 2010-05, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

Abstract: This paper explores different fiscal stimuli within a business cycle model with an endogenous number of firms. We demonstrate that a changing number of firms is a crucial dimension for evaluating fiscal policy since it accelerates the impacts of fiscal policy. In the presence of demand stimuli fiscal multipliers are small and the number of firms may decline, in particular under distortionary tax financing. Policies that disburden private agents from income taxes, on the other hand, are effective in boosting economic activity and new firm creation.

Keywords: Fiscal Multipliers; Firm Entry; Product Variety (search for similar items in EconPapers)
JEL-codes: E22 E32 E62 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-dge, nep-ent and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Fiscal stimulus in model with endogenous firm entry (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:201005

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