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The Keynesian Multiplier Effect Reconsidered

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  • YOSHIYASU ONO

Abstract

In the standard Keynesian framework, government spending on useless public works has a larger multiplier effect than spending on government transfer payments does. In other words, spending on useless public works increases national income by more than an equivalent increase in government transfer payments would. Nevertheless, their effects on national benefit are identical. For both, the national benefit equals the direct benefit created by the spending. If there are two income classes, some transfers reduce both the national income and the national benefit. Some government purchases completely crowd out private consumption and reduce the national benefit.
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  • Yoshiyasu Ono, 2011. "The Keynesian Multiplier Effect Reconsidered," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 787-794, June.
    • Handle: RePEc:mcb:jmoncb:v:43:y:2011:i:4:p:787-794
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    2. Gupta, Sanjeev & Clements, Benedict & Baldacci, Emanuele & Mulas-Granados, Carlos, 2005. "Fiscal policy, expenditure composition, and growth in low-income countries," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 441-463, April.
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    3. Scott Brown & Demetra Demetriou & Panayiotis Theodossiou, 2018. "Banking Crisis in Cyprus: Causes, Consequences and Recent Developments," Multinational Finance Journal, Multinational Finance Journal, vol. 22(1-2), pages 63-118, March - J.
    4. Victor Ushahemba Ijirshar & Joshua Kpelai Nomkuha & Benjamin Bem Bura & Joseph Tarza Sokpo & Mlumun Queen Ijirshar, 2023. "Ease of doing business and investment among West African countries," African Development Review, African Development Bank, vol. 35(2), pages 97-112, June.
    5. Vincent, Jeffrey R., 2012. "Ecosystem services and green growth," Policy Research Working Paper Series 6233, The World Bank.
    6. Tanaka Yasuhito, 2020. "A Keynesian Approach to Fiscal Policy for Full Employment and Continuous Time Debt Dynamics," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 65(1), pages 20-38, April.
    7. Nakajima, Tetsuya, 2013. "Industrial Development, Polarisation, and Fiscal Policy in an Underemployment Economy," MPRA Paper 54908, University Library of Munich, Germany.
    8. Murota, Ryu-ichiro & Ono, Yoshiyasu, 2015. "Fiscal policy under deflationary gap and long-run stagnation: Reinterpretation of Keynesian multipliers," Economic Modelling, Elsevier, vol. 51(C), pages 596-603.

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