Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92814
Authors: 
Ono, Yoshiyasu
Year of Publication: 
2006
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 673
Abstract: 
Although the Keynesian multiplier effect of public works is criticized for lack of a microeconomic foundation, it is still taught in most undergraduate courses and believed to be useful for policy makers. However, it has a serious fallacy even if we accept the consumption function. This note shows that useless public works is equivalent to unemployment relief expenditure in the presence of unemployment and that the argument on the multiplier effect seriously misleads the present national accounting and thereby distorts evaluation of public works. A correction of the textbook explanation on the income analysis is also provided.
Subjects: 
multiplier effect
consumption function
national income account
JEL: 
E12
E62
E01
Document Type: 
Working Paper

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