Journal articles
Nonseparable preferences do not rule out aggregate instability under balanced-budget rules: a note
Abstract : We investigate the role of nonseparable preferences in the occurrence of macroeconomic instability under a balanced-budget rule where government spending is financed by a tax on labor income. Considering a one-sector neoclassical growth model with a large class of nonseparable utility functions, we find that expectations-driven fluctuations occur easily when consumption and labor are Edgeworth substitutes or weak Edgeworth complements. Under these assumptions, an intermediate range of tax rates and a sufficiently low elasticity of intertemporal substitution in consumption lead to instability.
Keywords :
Economie quantitative
https://hal-amu.archives-ouvertes.fr/hal-01505770
Contributor : Elisabeth Lhuillier Connect in order to contact the contributor
Submitted on : Tuesday, April 11, 2017 - 5:56:15 PM
Last modification on : Thursday, November 4, 2021 - 11:58:07 AM
Contributor : Elisabeth Lhuillier Connect in order to contact the contributor
Submitted on : Tuesday, April 11, 2017 - 5:56:15 PM
Last modification on : Thursday, November 4, 2021 - 11:58:07 AM
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