FISCAL SPENDING AND NATIONAL INCOME WITH IMPERFECT COMPETITION*

Abstract

In this paper, the authors examine fiscal policy effectiveness under oligopolistic competition and increasing returns to scale. Their results indicate that fiscal policy is always contractionary in a classical, full-employment economy. Similarly, fiscal policy can reduce national income in a Keynesian, unemployment model. Hence, fiscal policy may not be effective in promoting national income. Copyright 1996 by Blackwell Publishers Ltd and The Victoria University of Manchester