International Transmission of Government Spending, Monopolistic Competition and North-South Trade
This paper utilises a North-South general equilibrium model where South exports an intermediate good to North in exchange for differentiated goods. The model is used to examine international transmission of government spending and its welfare implications. It is shown that an increase in government spending in North (South) can increase (decrease) the number of differentiated goods produced, thereby decreasing (increasing) the degree of monopoly power in North. Furthermore an increase in government spending in South can decrease the welfare North, but the impact of an increase in government spending in North the welfare of South cannot be unambiguously determined. [F11, H41]
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Volume (Year): 11 (1997)
Issue (Month): 4 ()
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References listed on IDEAS
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- Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
- Durlauf, Steven N. & Staiger, Robert W., 1990.
"Compositional effects of government spending in a two-country, two-sector production model,"
Journal of International Economics,
Elsevier, vol. 28(3-4), pages 333-347, May.
- Steven N. Durlauf & Robert W. Staiger, 1988. "Compositional Effects of Government Spending in a Two-Country Two-SectorProduction Model," NBER Working Papers 2543, National Bureau of Economic Research, Inc.
- Michael Devereux, 1988. "Non-traded Goods and the International Transmission of Fiscal Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 21(2), pages 265-78, May.
- Svensson, Lars E O, 1987. " International Fiscal Policy Transmission," Scandinavian Journal of Economics, Wiley Blackwell, vol. 89(3), pages 305-34.
- Kemp, Murray C. & Ohyama, Michihiro, 1978. "On the sharing of trade gains by resource-poor and resource-rich countries," Journal of International Economics, Elsevier, vol. 8(1), pages 93-115, February.
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