Publicação
Diffusion Dynamics in Economics: an Application to the Effects of Fiscal Policy
| Resumo: | This study addresses diffusion dynamics in an economic environment in which fiscal policy changes take place. The discussion, based upon a conventional intertemporal optimization setup, involves the consideration of a peculiar form of bounded rationality: it is assumed that only a small share of house- holds is able to instantly recompute the optimal solution once the value of a tax rate is disturbed; all the other agents will then, gradually, follow the behavior of thefirst group (this can occur through contagion, social influence or social learning). As a result, the convergence towards the post-perturbation steady-state tends to follow a diffusion process and, consequently, policy measures may take time in affecting pervasively labor-leisure and consumption-savings choices. |
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| Autores principais: | Gomes, Orlando |
| Assunto: | Fiscal policy, Diffusion processes, Utility maximization, Labor- leisure choices. |
| Ano: | 2014 |
| País: | Portugal |
| Tipo de documento: | capítulo de livro |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Instituto Politécnico de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório Científico do Instituto Politécnico de Lisboa |
| Resumo: | This study addresses diffusion dynamics in an economic environment in which fiscal policy changes take place. The discussion, based upon a conventional intertemporal optimization setup, involves the consideration of a peculiar form of bounded rationality: it is assumed that only a small share of house- holds is able to instantly recompute the optimal solution once the value of a tax rate is disturbed; all the other agents will then, gradually, follow the behavior of thefirst group (this can occur through contagion, social influence or social learning). As a result, the convergence towards the post-perturbation steady-state tends to follow a diffusion process and, consequently, policy measures may take time in affecting pervasively labor-leisure and consumption-savings choices. |
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