On the monotonicity of balanced budget multiplier under imperfect competition

This paper presents a counterexample to the wellknown monotonicity result of Mankiw (1988) [Mankiw, N.G., 1988. Imperfect competition and the Keynesian cross. Economics Letters 26, 7–13]. In particular by considering taxes on labor income rather than lumpsum taxes it obtains a negative relation between the magnitude of the balanced budget multiplier and marketpower.