Can Fiscal Spending Be Contractionary in the Neoclassical Economy?
Author InfoChao, Chi-Chur Yu, Eden S H Abstract Utilizing a two-sector, general equilibrium model with variable returns-to-scale technology, the authors examine the effects of fiscal spending on the goods-price ratio, private income, government income, and national income in a neoclassical economy. The fiscal policy is contractionary when the unfavorable price-induced production effect via a smaller elasticity of the returns to scale outweighs the gain from the private appreciation of government spending. With identical (or constant) returns to scale and zero appreciation of government spending, fiscal policy is ineffective. Copyright 1993 by The London School of Economics and Political Science. Download InfoTo download: If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the
