In this paper we consider the spatial dispersion of unemployment vis-à-vis that
of inflation and the implication of this relative dispersion for fiscal policy. Two
empirical tests yield results that are consistent with our a priori expectations
that inflation is more evenly distributed throughout the economy (i.e., less
dispersed spatially) than is unemployment. Using a simple short-run model, we
argue that tax policy should be geared to a price stability objective and
expenditure policy to a full employment objective. Consequently, the Phillips
curve dilemma could be lessened by the appropriate use of tax and expenditure
policy.
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