Economic Planning and Intersectoral Fiscal Policies

Abstract

summary: this paper attacks the conventional wisdom that fiscal policies move an economy along a unique, downward-sloping, short-run phillips curve. in the context of a non-market-clearing model, it is shown that whenever demand-pull inflation and involuntary unemployment occur conjointly, (a) each sectoral government expenditure and each sectoral tax receipt is (in general) associated with a different phillips curve, (b) whereas some of these phillips curves may be downward-sloping, others maybe upward-sloping, and (c) sectoral fiscal policies which increase the budget deficit do not necessarily induce upward movements along their respective phillips curves and sectoral fiscal policies which reduce the budget deficit do not necessarily give rise to downward movements. the policy implication of this analysis is that the inflation-unemployment impact of aggregate government expenditures and aggregate tax receipts may be manipulated through their intersectoral breakdown.;