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Fiscal Policy in a Growing Economy with Financial Frictions and Firm Heterogeneity

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  • Kazuo Mino

    (Kyoto University)

Abstract

This paper constructs a tractable model of endogenous growth with financial frictions and firm heterogeneity. We introduce factor income tax, consumption tax as well as the government consumption into the base model and explore the growth effect of fiscal policy. We show that from the qualitative perspective, the long-run effects of fiscal actions in our model are similar to those obtained in the representative agent models. However, the quantitative impacts of fiscal policy on long-run growth in our setting can be substantially different from those established in the model where agents are homogeneous and there is no financial frictions.

Suggested Citation

  • Kazuo Mino, 2016. "Fiscal Policy in a Growing Economy with Financial Frictions and Firm Heterogeneity," The Japanese Economic Review, Springer, vol. 67(1), pages 3-30, March.
    • Handle: RePEc:spr:jecrev:v:67:y:2016:i:1:d:10.1111_jere.12087
    DOI: 10.1111/jere.12087
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    2. Cheng-wei Chang & Ting-wei Lai, 2024. "Government spending and monopolistic competition with heterogeneous firm productivity," Journal of Economics, Springer, vol. 141(2), pages 101-135, March.
    3. Maebayashi, Noritaka, 2024. "Sustainability of public debt, investment subsidies, and endogenous growth with heterogeneous firms and financial frictions," MPRA Paper 120884, University Library of Munich, Germany.

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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