Advanced Search
MyIDEAS: Login to save this article or follow this journal

Consumption effects of government purchases

Contents:

Author Info

  • Serletis, Apostolos
  • Shahmoradi, Asghar

Abstract

This paper takes a microeconomic- and aggregation-theoretic approach to the empirical analysis of the relationship between private and government consumption. It provides estimates of the Morishima elasticities of substitution based on an empirical comparison and evaluation of the effectiveness of a number of well-known flexible functional forms - the locally flexible generalized Leontief (see Diewert (1971)), translog (see Christensen et al. (1975)), and Almost Ideal Demand System (AIDS) (see Deaton and Muellbauer (1980)), and the semi-nonparametric globally flexible Fourier (see Gallant (1981)) and Asymptotically Ideal Model (AIM) (see Barnett et al. (1991)). In doing so, we pay explicit attention to the theoretical regularity conditions of positivity, monotonicity, and curvature, using recent advances in microeconometrics. Our results indicate that substitutability describes the relationship between government and private consumption, and hence concur with the consensus opinion that government purchases are substitutes for private consumption.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6X4M-4X3W436-1/2/212981f8f83ace01e2c5ef545e47678f
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 3 (September)
Pages: 892-905

as in new window
Handle: RePEc:eee:jmacro:v:32:y:2010:i:3:p:892-905

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Fourier flexible functional form Asymptotically ideal model Morishima elasticity of substitution;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Graham, Fred C, 1993. "Fiscal Policy and Aggregate Demand: Comment," American Economic Review, American Economic Association, vol. 83(3), pages 659-66, June.
  2. Karras, Georgios, 1994. "Government Spending and Private Consumption: Some International Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(1), pages 9-22, February.
  3. Diewert, W E, 1974. "Intertemporal Consumer Theory and the Demand for Durables," Econometrica, Econometric Society, vol. 42(3), pages 497-516, May.
  4. Turnovsky, Stephen J. & Fisher, Walter H., 1995. "The composition of government expenditure and its consequences for macroeconomic performance," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 747-786, May.
  5. Barnett, William A., 1983. "Definitions of 'second order approximation' and of 'flexible functional form'," Economics Letters, Elsevier, vol. 12(1), pages 31-35.
  6. Ni, Shawn, 1995. "An empirical analysis on the substitutability between private consumption and government purchases," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 593-605, December.
  7. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
  8. Barnett, William A., 2002. "Tastes and technology: curvature is not sufficient for regularity," Journal of Econometrics, Elsevier, vol. 108(1), pages 199-202, May.
  9. Apostolos Serletis & Asghar Shahmoradi, 2005. "A Note on Imposing Local Curvature on Generalized Leontief Models," Econometrics 0509020, EconWPA.
  10. Gallant, A. Ronald & Golub, Gene H., 1984. "Imposing curvature restrictions on flexible functional forms," Journal of Econometrics, Elsevier, vol. 26(3), pages 295-321, December.
  11. Kormendi, Roger C, 1983. "Government Debt, Government Spending, and Private Sector Behavior," American Economic Review, American Economic Association, vol. 73(5), pages 994-1010, December.
  12. Eastwood, Brian J. & Gallant, A. Ronald, 1991. "Adaptive Rules for Seminonparametric Estimators That Achieve Asymptotic Normality," Econometric Theory, Cambridge University Press, vol. 7(03), pages 307-340, September.
  13. Diewert, W E, 1971. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 481-507, May-June.
  14. Barnett, William A. & Serletis, Apostolos, 2008. "Measuring Consumer Preferences and Estimating Demand Systems," MPRA Paper 12318, University Library of Munich, Germany.
  15. Diewert, W. E., 1977. "Generalized slutsky conditions for aggregate consumer demand functions," Journal of Economic Theory, Elsevier, vol. 15(2), pages 353-362, August.
  16. Graham, Fred C & Himarios, Daniel, 1991. "Fiscal Policy and Private Consumption: Instrumental Variables Tests of the "Consolidated Approach."," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(1), pages 53-67, February.
  17. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-34, June.
  18. Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
  19. William A. Barnett & Meenakshi Pasupathy, 2001. "Regularity Of The Generalized Quadratic Production Model: A Counterexample," Econometrics 0112001, EconWPA.
  20. Adrian R. Fleissig & Robert J. Rossana, 2003. "Are Consumption and Government Expenditures Substitutes or Complements? Morishima Elasticity Estimates from the Fourier Flexible Form," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 132-146, January.
  21. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  22. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
  23. Masao Ogaki & Carmen M. Reinhart, 1998. "Measuring Intertemporal Substitution: The Role of Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1078-1098, October.
  24. Campbell, John Y. & Mankiw, N. Gregory, 1990. "Permanent Income, Current Income, and Consumption," Scholarly Articles 3353762, Harvard University Department of Economics.
  25. Barro, Robert J, 1981. "Output Effects of Government Purchases," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1086-1121, December.
  26. Serletis, Apostolos & Shahmoradi, Asghar, 2005. "Semi-Nonparametric Estimates Of The Demand For Money In The United States," Macroeconomic Dynamics, Cambridge University Press, vol. 9(04), pages 542-559, September.
  27. Ahmed, Shaghil, 1986. "Temporary and permanent government spending in an open economy: Some evidence for the United Kingdom," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 197-224, March.
  28. Moschini, Giancarlo, 1999. "Imposing Local Curvature Conditions in Flexible Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 487-90, October.
  29. Amemiya, Takeshi, 1977. "The Maximum Likelihood and the Nonlinear Three-Stage Least Squares Estimator in the General Nonlinear Simultaneous Equation Model," Econometrica, Econometric Society, vol. 45(4), pages 955-68, May.
  30. Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-88, September.
  31. Barten, A. P., 1969. "Maximum likelihood estimation of a complete system of demand equations," European Economic Review, Elsevier, vol. 1(1), pages 7-73.
  32. Barnett, William A. & Lee, Yul W. & Wolfe, Michael D., 1985. "The three-dimensional global properties of the minflex laurent, generalized leontief, and translog flexible functional forms," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 3-31.
  33. Aschauer, David Alan, 1985. "Fiscal Policy and Aggregate Demand," American Economic Review, American Economic Association, vol. 75(1), pages 117-27, March.
  34. Davis, George C & Gauger, Jean, 1996. "Measuring Substitution in Monetary-Asset Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 203-08, April.
  35. Serletis, Apostolos & Shahmoradi, Asghar, 2007. "Flexible Functional Forms, Curvature Conditions, And The Demand For Assets," Macroeconomic Dynamics, Cambridge University Press, vol. 11(04), pages 455-486, September.
  36. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-83, June.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:32:y:2010:i:3:p:892-905. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.