The Balanced Budget Multiplier and Labour Intensity in Home Production
International Journal of Economic Behavior and Organization
Volume 3, Issue 2-1, April 2015, Pages: 23-30
Received: Jan. 14, 2015; Accepted: Jan. 17, 2015; Published: Feb. 27, 2015
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Authors
Masatoshi Yoshida, Faculty of Economics, Ryukoku University, 67, Fukakusa, Tsukamoto-cho, Fushimi-ku, Kyoto, Japan
Stephen J. Turnbull, Graduate School of Systems and Information Engineering, University of Tsukuba, 1-1-1, Tennodai, Tsukuba, Ibaraki, Japan
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Abstract
This paper shows that the labour intensity of home production of a final consumption good affects national income and income multiplier effects of public expenditure financed by taxation. A reduction in labour intensity increases the level of national income but decreases the magnitude of the balanced budget multiplier effect. This result holds whether the tax instrument is distortionary or non-distortionary. It follows that the recent diffusion of labour-saving innovations such as washing machines and vacuum cleaners may have the effect of decreasing the effectiveness of fiscal policy.
Keywords
Multiplier Effects, Public Expenditure, Taxation, Labour Intensity, and Home Production
To cite this article
Masatoshi Yoshida, Stephen J. Turnbull, The Balanced Budget Multiplier and Labour Intensity in Home Production, International Journal of Economic Behavior and Organization. Special Issue: Recent Developments of Economic Theory and Its Applications. Vol. 3, No. 2-1, 2015, pp. 23-30. doi: 10.11648/j.ijebo.s.2015030201.15
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