Đào Thị Bích Thủy

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Abstract

A notable feature of developing countries is the existence of multi sector economy in the form of state owned, collective, private, foreign owned economic sectors and so on. In various economic sectors, the differences in capital ownership, production technology, economic objectives and behavior can lead to different forms of economic performance among them. This variety in economic performance may create inefficiency in resource allocation which results in the failure to achieve the potential output when the economy is in its full capacity. This calls for the intervention of government. The government will play an important role in redirecting resource allocation in such a way as to help the economy to restore to its efficiency. One of the policy measures that government can use is to implement fiscal policy. Beside its positive effect on the efficient allocation of resources, fiscal policy (in particular, the optimal output tax policy) can have some impact on income distribution among various economic participants.