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A panel cointegration approach to estimating substitution elasticities in consumption

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  • Auteri, Monica
  • Costantini, Mauro

Abstract

This paper investigates the relationship between government spending and private consumption. The general framework is a cointegration approach of Ogaki (1992) used to estimate the intratemporal elasticity of substitution between government and private consumption in a panel of 15 European countries. Recently developed non-stationary panel methodologies that assume cross-section dependence are applied. Results indicate an Edgeworth substitutability between private and public spending.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 27 (2010)
Issue (Month): 3 (May)
Pages: 782-787

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Handle: RePEc:eee:ecmode:v:27:y:2010:i:3:p:782-787

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Cointegration Government expenditure Intratemporal substitution Macroeconomic aspects of public finance Panel Unit root;

References

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  4. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
  5. Pesaran, M.H., 2004. "‘General Diagnostic Tests for Cross Section Dependence in Panels’," Cambridge Working Papers in Economics 0435, Faculty of Economics, University of Cambridge.
  6. Okubo, Masakatsu, 2003. "Intratemporal substitution between private and government consumption: the case of Japan," Economics Letters, Elsevier, vol. 79(1), pages 75-81, April.
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  17. Slobodan Djajic, 1987. "Government Spending and the Optimal Rates of Consumption and Capital Accumulation," Canadian Journal of Economics, Canadian Economics Association, vol. 20(3), pages 544-54, August.
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  23. Ogaki, M., 1990. "Engel'S Law And Cointegration," RCER Working Papers 228, University of Rochester - Center for Economic Research (RCER).
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  25. van Dalen, Hendrik P., 1999. "Intertemporal substitution in public and private consumption -- long-run evidence from the US and the UK," Economic Modelling, Elsevier, vol. 16(3), pages 355-370, August.
  26. Slobodan Djajic, 1987. "Government Spending and the Optimal Rates of Consumption and Capital Accumulation," Working Papers 681, Queen's University, Department of Economics.
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  30. Christian Gengenbach & Franz C. Palm & Jean-Pierre Urbain, 2006. "Cointegration Testing in Panels with Common Factors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(s1), pages 683-719, December.
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Cited by:
  1. Joan Esteban & Laura Mayoral, 2013. "A Politico-Economic Model of Public Expenditure and Income Taxation," Working Papers 743, Barcelona Graduate School of Economics.

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