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Public consumption composition in a growing economy

Listed author(s):
  • Censolo, Roberto
  • Colombo, Caterina

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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File URL: http://www.sciencedirect.com/science/article/pii/S0164-0704(08)00018-9
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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