Macroeconomic Externalities : Are Pigovian Taxes the Answer?

• Basic welfare economics tells us that many types of externalities can be remedied by proper use of corrective taxes and subsidies. This paper shows that this notion also extends to the macroeconomic externalities discussed in recent Keynesian literature on nominal price rigidities. The derived policy rules are lindred in spirit to standard Keynesian policy prescriptions: Progressive income taxes may serve a useful role in combating wasteful economic fluctuations. However, unlike older fix-price models of automatic stabilizers, progressive taxes work in our monopolistic economy because they directly affect the pricing mechanism.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

Economics

Nationalekonomi

Publikations- och innehållstyp

vet (ämneskategori)

rap (ämneskategori)