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Macroeconomic (in)stability and endogenous market structure with productive government expenditure

Author

Listed:
  • Chang Cheng-Wei

    (Institute of Economics, Academia Sinica, Nankang, Taipei 115, Taiwan, Phone: 886-2-27822791 ext. 516, Fax: 886-2-27853946)

  • Lai Ching-Chong

    (Institute of Economics, Academia Sinica, Taiwan)

Abstract

We consider the congestion effect of productive government spending in a monopolistic competition model with endogenous entry, and analyze the possibility of local indeterminacy. Some main findings emerge from the analysis. First, the indeterminacy condition is independent of the monopoly power. Second, productive government expenditure can be a source of local indeterminacy, while a higher degree of public goods congestion lessens the beneficial effect of productive government expenditure, and therefore reduces the possibility of indeterminacy. Third, a higher degree of internal returns to scale is associated with a lower possibility for the emergence of indeterminacy when production externalities are present.

Suggested Citation

  • Chang Cheng-Wei & Lai Ching-Chong, 2017. "Macroeconomic (in)stability and endogenous market structure with productive government expenditure," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 21(2), pages 1-16, April.
    • Handle: RePEc:bpj:sndecm:v:21:y:2017:i:2:p:16:n:4
    DOI: 10.1515/snde-2016-0002
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    References listed on IDEAS

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    More about this item

    Keywords

    congestion; endogenous market structure; internal returns to scale; local indeterminacy; productive government expenditure;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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