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Equilibrium Determinacy in a Two-Tax System with Utility from Government Expenditure

Fujisaki, Seiya (2017): Equilibrium Determinacy in a Two-Tax System with Utility from Government Expenditure.

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Abstract

We analyse the relationship between two kinds of tax and equilibrium determinacy in an economy with government expenditure used for utility. We assume that the income tax rate depends on the level of income itself and that the tax rate of consumption is constant. This describes a realistic tax system which resonates in many countries. Our model complements similar extant research, but we extend the literature by theoretically showing that the expansion of policy types can decrease the risk of instability when one condition slightly changes.

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