Balanced Budget Government Spending in a Small Open Regional Economy
AbstractThis paper investigates the impact of a balanced budget fiscal policy expansion in a regional context within a numerical dynamic general equilibrium model. We take Scotland as an example where, recently, there has been extensive debate on greater fiscal autonomy. In response to a balanced budget fiscal expansion the model suggests that: an increase in current government purchase in goods and services has negative multiplier effects only if the elasticity of substitution between private and public consumption is high enough to move downward the marginal utility of private consumers; public capital expenditure crowds in consumption and investment even with a high level of congestion; but crowding out effects might arise in the short-run if agents are myopic.
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Bibliographic InfoPaper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2010-68.
Date of creation: 2010
Date of revision:
regional computable general equilibrium analysis; fiscal federalism; fiscal policy.;
Other versions of this item:
- Peter McGregor & Patrizio Lecca & Kim Swales, 2012. "Balanced Budget Government Spending in a Small Open Regional Economy," ERSA conference papers ersa12p1009, European Regional Science Association.
- Patrizio Lecca & Peter McGregor & Kim Swales, 2010. "Balanced Budget Government Spending in a Small Open Regional Economy," Working Papers 1020, University of Strathclyde Business School, Department of Economics.
- H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
- R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General
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