Macroeconomic Stabilization Through Taxation and Indexation: The use ofFirm-Specific Information / Richard C. Marston, Stephen J. Turnovsky.

Format:

Book

Author/Creator:

Marston, Richard C.

Contributor:

National Bureau of Economic Research.

Turnovsky, Stephen J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1586.

NBER working paper series no. w1586

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Macroeconomic Stabilization Through Taxation and Indexation

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Summary:

This paper considers two alternative approaches to stabilizing an economy with firm-specific productivity disturbances. The first uses wage contracts tying wages in each firm to these disturbances as well as the price level. The second uses a tax on firms which modifies their supply behavior together with a simple waqe indexation rule tying wages to prices alone. Both these schemes are viable as long as the firm-specific disturbance is known to all agents. If the firm alone observes the productivity disturbance, under either scheme it has an incentive to misrepresent current conditions. However, a combination of these two schemes is both welfare maximizing and incentive compatible.

Notes:

Print version record

March 1985.