Productive Public Spending in a Balassa-Samuelson Model of Dual Inflation
Dual inflation takes place when prices increases in non-tradable goods are higher than those of tradable goods. In this paper, we develop a model where public spending has a positive externality on the production of those sectors. The main results suggested by the paper are the following: 1)An increase in non-productive public spending does not generate dual inflation, as the usual Balassa-Samuelson result states and 2) An increase in productive public spending raises the productivity of those sectors and this can result in dual inflation, dual deflation or no effect on prices. Dual inflation only takes place when public spending has a bigger effect on the production technology of the tradable sector than on the non-tradable one.
|Date of creation:||2000|
|Contact details of provider:|| Postal: Chalé dos Catedráticos, 1. Avda. das Ciencias s/n. Campus Vida, 15782 Santiago de Compostela|
Phone: 981 59 11 66
Fax: 981 59 99 35
Web page: http://www.usc.es/idega/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:edg:anecon:0014. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manuel Fernandez Grela)
If references are entirely missing, you can add them using this form.