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Public consumption composition in a growing economy

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  • Censolo, Roberto
  • Colombo, Caterina

Abstract

This paper explores the role of the composition of public consumption within a three sector R&D growth model. A competitive industry supplies a homogeneous good and a monopolistic sector manufactures a composite commodity differentiated in many varieties, whose size can be increased through investment in R&D. We investigate the effects of changes in the level and in the composition of public consumption on the steady state and on the economy's transitional dynamics. By varying the aggregate composition of demand, the government can effectively move resources away from the traditional industry to foster innovation. Welfare effects are also evaluated. We show that the composition of government consumption affects the entire time path of utility.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 4 (December)
Pages: 1479-1495

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:4:p:1479-1495

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Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Public consumption Demand composition Growth Fiscal policy;

References

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Cited by:
  1. Simon Wiederhold, 2012. "The Role of Public Procurement in Innovation: Theory and Empirical Evidence," ifo Beiträge zur Wirtschaftsforschung, Ifo Institute for Economic Research at the University of Munich, number 43, July.
  2. Simon Wiederhold, 2009. "Government Spending Composition in a Simple Model of Schumpeterian Growth," Jena Economic Research Papers 2009-101, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.

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