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Aggregate Investment Expenditures on Tradable and Nontradable Goods

  • Rudolfs Bems

    (International Monetary Fund)

This paper shows that aggregate investment expenditure shares on tradable and nontradable goods are very similar in rich and poor countries, as well as in different regions of the world. Furthermore, the two expenditure shares have remained close to constant over time, with the average expenditure share on nontradables varying between 0.54-0.62 over the 1960-2004 period. The results of this paper offer a new restriction for two-sector models of the aggregate economy. Combined with the fact that the relative price of nontradables correlates positively with income and exhibits large differences across space and time, our findings suggest that tradable and nontradable goods in investment can be modeled using the Cobb-Douglas aggregator. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2008.02.004
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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 11 (2008)
Issue (Month): 4 (October)
Pages: 852-883

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Handle: RePEc:red:issued:07-58
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