Zhang, Yan (2008): Tariff and Equilibrium Indeterminacy--(I).
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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.
|Item Type:||MPRA Paper|
|Original Title:||Tariff and Equilibrium Indeterminacy--(I)|
|Keywords:||Indeterminacy, Endogenous Tariff Rate, Small Open Economy, Exogenous Government Expenditure|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy
|Depositing User:||Yan Zhang|
|Date Deposited:||25. Apr 2008 14:48|
|Last Modified:||12. Feb 2013 20:45|
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