The Keynesian Multiplier Effect Reconsidered

ISER Discussion Paper No. 730

8 Pages Posted: 16 Jan 2009

See all articles by Yoshiyasu Ono

Yoshiyasu Ono

Osaka University - Institute of Social and Economic Research (ISER)

Date Written: January 14, 2009

Abstract

The Keynesian multiplier effect is reinterpreted and several issues that may have misled assessments of the effect of fiscal spending are discussed. It is shown that even in the textbook Keynesian framework some transfer policy 'reduces' aggregate demand and that public works spending may completely crowd out private consumption. Useless public works are found to be equivalent to transfers although they increase accounting national income more than transfers do. The net effect of fiscal spending on national benefits is explored and shown to equal only the direct benefit created by the spending.

Keywords: the multiplier effect, public works, unemployment benefits, national income accounting

JEL Classification: E12, E62, E01

Suggested Citation

Ono, Yoshiyasu, The Keynesian Multiplier Effect Reconsidered (January 14, 2009). ISER Discussion Paper No. 730. Available at SSRN: https://ssrn.com/abstract=1328117 or http://dx.doi.org/10.2139/ssrn.1328117

Yoshiyasu Ono (Contact Author)

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki, Osaka 567-0047
Japan

Register to save articles to
your library

Register

Paper statistics

Downloads
186
Abstract Views
1,175
rank
161,214
PlumX Metrics