Productive public expenditure and imperfect competition with endogenous price markup
AbstractThis paper incorporates the productivity role of government expenditure into the imperfectly competitive macroeconomic model and re-examines the important findings on the fiscal multiplier proposed by Dixon (1987), Mankiw (1988), and Startz (1989). Generally speaking, we find that the classical results of imperfect competition models should be modified when the productivity role of government expenditure is taken into account. The short-run fiscal multiplier may be positive or negative, depending crucially upon whether the public infrastructure and the private input are technical substitutes or complements for each other. The short-run fiscal multiplier does not necessarily exceed the corresponding long-run multiplier. If public expenditure and private inputs are technically substitutes, the long-run fiscal multiplier may exceed the short-run fiscal multiplier. Additionally, in the long-term analysis, the dynamics of entry is investigated. In response to a change in government policy, the novel transitions of output and entry provide us with important policy implications. Copyright 2005, Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Oxford Economic Papers.
Volume (Year): 57 (2005)
Issue (Month): 3 (July)
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- Costa, Luís & Palma, Nuno, 2006.
"Comment on "Productive Public Expenditure and Imperfect Competition with Endogenous Price Markup","
5143, University Library of Munich, Germany, revised 08 Jun 2007.
- Luís F. Costa & Nuno Palma, 2006. "Productive Public Expenditure and Imperfect Competition with Endogenous Price Markup: Comment," Working Papers Department of Economics 2006/24, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Chiara Del Bo & Massimo Florio & Silvia Vignetti & Emanuela Sirtori, 2011. "Additionality and regional development: are EU Structural Funds complements or substitutes of national Public Finance?," Working Papers 201101, Centre for Industrial Studies (CSIL).
- Luís F. Costa & Huw Dixon, 2009.
"Fiscal Policy under Imperfect Competition: A Survey,"
Working Papers Department of Economics
2009/25, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Costa, Luís F. & Dixon, Huw David, 2010. "Fiscal policy under imperfect competition: A survey," Economics Discussion Papers 2010-14, Kiel Institute for the World Economy.
- Hashimzade, Nigar & Myles, Gareth D., 2010. "Growth And Public Infrastructure," Macroeconomic Dynamics, Cambridge University Press, vol. 14(S2), pages 258-274, November.
- repec:rdg:emxxdp:em-dp2009-03 is not listed on IDEAS
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