IDEAS home Printed from https://ideas.repec.org/a/ebl/ecbull/eb-11-00542.html
   My bibliography  Save this article

Monopolistic Competition and Increasing Returns: Implications for Optimal Fiscal Policies and Over-entry

Author

Listed:
  • Chien-Yin Chen

    (Department of Economics, Natinal Taipei University)

  • Fu-Sheng Hung

    (Department of Economics, National Chengchi University)

Abstract

By separating monopolistic competition from increasing returns to fully disentangle their corresponding effects, this paper find that optimal tax rates on factor incomes are decreasing in the degree of increasing returns, but are independent of the degree of market power. Moreover, free entry may lead to over or too little entry relative to the social optimum, depending on the relative strengths of the effects from increasing returns, market power, and congestion. These conclusions are different from the recent study that uses the same parameter to characterize increasing returns and monopolistic competition.

Suggested Citation

  • Chien-Yin Chen & Fu-Sheng Hung, 2012. "Monopolistic Competition and Increasing Returns: Implications for Optimal Fiscal Policies and Over-entry," Economics Bulletin, AccessEcon, vol. 32(2), pages 1142-1150.
    • Handle: RePEc:ebl:ecbull:eb-11-00542
    as

    Download full text from publisher

    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I2-P108.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1173-1187, November.
    2. Juin‐jen Chang & Hsiao‐wen Hung & Jhy‐yuan Shieh & Ching‐chong Lai, 2007. "Optimal Fiscal Policies, Congestion and Over‐entry," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(1), pages 137-151, March.
    3. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chakraborty Shankha & Dabla-Norris Era, 2011. "The Quality of Public Investment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-29, August.
    2. Jones, Larry E. & Manuelli, Rodolfo E., 1997. "The sources of growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 75-114, January.
    3. Ingrid Ott & Stephen J. Turnovsky, 2006. "Excludable and Non‐excludable Public Inputs: Consequences for Economic Growth," Economica, London School of Economics and Political Science, vol. 73(292), pages 725-748, November.
    4. Ingrid Ott & Susanne Soretz, 2006. "Governmental activity, integration, and agglomeration," Working Paper Series in Economics 57, University of Lüneburg, Institute of Economics.
    5. van de Klundert, T.C.M.J. & Smulders, J.A., 1991. "Reconstructing growth theory : A survey," Other publications TiSEM 19355c51-17eb-4d5d-aa66-b, Tilburg University, School of Economics and Management.
    6. repec:hal:spmain:info:hdl:2441/6493 is not listed on IDEAS
    7. Urrunaga, Roberto & Aparicio, Carlos, 2012. "Infrastructure and economic growth in Peru," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    8. Walid Hejazi, 2005. "Are Regional Concentrations of OECD Exports and Outward FDI Consistent with Gravity?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(4), pages 423-436, December.
    9. Ghate Chetan, 2003. "The Politics of Endogenous Growth," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-18, August.
    10. Maria Bas & Vanessa Strauss-Kahn, 2013. "Input-Trade Liberalization, Export Prices and Quality Upgrading," Working Papers hal-03460775, HAL.
    11. Antonio Soares Martins Neto & Gilberto Tadeu Lima, 2017. "Competitive Exchange Rate and Public Infrastructure in a Macrodynamic of Economic Growth," Metroeconomica, Wiley Blackwell, vol. 68(4), pages 792-815, November.
    12. Eckhard Janeba, 2004. "International Trade and Cultural Identity," NBER Working Papers 10426, National Bureau of Economic Research, Inc.
    13. Gustavo Marrero, 2010. "Tax-mix, public spending composition and growth," Journal of Economics, Springer, vol. 99(1), pages 29-51, February.
    14. Susanne Soretz, 2003. "Stochastic Pollution and Environmental Care in an Endogenous Growth Model," Manchester School, University of Manchester, vol. 71(4), pages 448-469, July.
    15. Francesco Amodio & Leonardo Baccini & Michele Di Maio, 2021. "Security, Trade, and Political Violence," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 1-37.
    16. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    17. Liao, Wei & Santacreu, Ana Maria, 2015. "The trade comovement puzzle and the margins of international trade," Journal of International Economics, Elsevier, vol. 96(2), pages 266-288.
    18. Grossman, Gene M. & Helpman, Elhanan, 1989. "Growth and Welfare in a Small Open Economy," Foerder Institute for Economic Research Working Papers 275466, Tel-Aviv University > Foerder Institute for Economic Research.
    19. Mark Thissen & Narisra Limtanakool & Hans Hilbers, 2011. "Road pricing and agglomeration economies: a new methodology to estimate indirect effects applied to the Netherlands," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(3), pages 543-567, December.
    20. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853, Elsevier.
    21. C. Michael Wernerheim & Christopher A. Sharpe, 2001. "The Potential Bias in Producer Service Employment Estimates: The Case of the Canadian Space Economy," Urban Studies, Urban Studies Journal Limited, vol. 38(3), pages 563-591, March.

    More about this item

    Keywords

    Optimal fiscal policies; monopolistic competition; increasing returns; over entry; congestion;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H4 - Public Economics - - Publicly Provided Goods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ebl:ecbull:eb-11-00542. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: John P. Conley (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.