Productive Public Expenditure and Imperfect Competition with Endogenous Price Markup: Comment
In a recent article Chen et al. (2005) analyse the role of government expenditure in an imperfectly competitive static model, introducing a government-expenditure externality through the production function. Our purpose in the present paper is to argue that the claim from the authors that their model generates an endogenous markup is in our view incorrect. We argue that their model does not contain an endogenous markup, but a fixed one and that their claim is based upon an incorrect interpretation of what is the marginal cost in their own model.
|Date of creation:||2006|
|Contact details of provider:|| Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL|
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Luís F. Costa, 2001.
"Endogenous Markups and Fiscal Policy,"
Working Papers Department of Economics
2001/06, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
- Luis Costa, 2004. "Endogenous markups and fiscal policy," Money Macro and Finance (MMF) Research Group Conference 2003 18, Money Macro and Finance Research Group.
- Dixit, Avinash K & Stiglitz, Joseph E, 1977.
"Monopolistic Competition and Optimum Product Diversity,"
American Economic Review,
American Economic Association, vol. 67(3), pages 297-308, June.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
- Dixon, Huw, 1987. "A Simple Model of Imperfect Competition with Walrasian Features," Oxford Economic Papers, Oxford University Press, vol. 39(1), pages 134-160, March.
- Heijdra, Ben J & van der Ploeg, Frederick, 1996. "Keynesian Multipliers and the Cost of Public Funds under Monopolistic Competition," Economic Journal, Royal Economic Society, vol. 106(438), pages 1284-1296, September.
- Jhy-hwa Chen & Jhy-yuan Shieh & Ching-chong Lai & Juin-jen Chang, 2005. "Productive public expenditure and imperfect competition with endogenous price markup," Oxford Economic Papers, Oxford University Press, vol. 57(3), pages 522-544, July.
- Richard Startz, 1989. "Monopolistic Competition as a Foundation for Keynesian Macroeconomic Models," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 737-752.
- Robert J. Barro & Silvana Tenreyro, 2000.
"Closed and Open Economy Models of Business Cycles with Marked Up and Sticky Prices,"
NBER Working Papers
8043, National Bureau of Economic Research, Inc.
- Robert J. Barro & Silvana Tenreyro, 2006. "Closed and Open Economy Models of Business Cycles with Marked Up and Sticky Prices," Economic Journal, Royal Economic Society, vol. 116(511), pages 434-456, 04.
- Robert J. Barro & Silvana Tenreyro, 2001. "Closed and open economy models of business cycles with marked-up and sticky prices," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
- N. Gregory Mankiw, 1987.
"Imperfect Competition and the Keynesian Cross,"
NBER Working Papers
2386, National Bureau of Economic Research, Inc.
- Devereux, Michael B & Head, Allen C & Lapham, Beverly J, 1996. "Monopolistic Competition, Increasing Returns, and the Effects of Government Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 233-254, May.
- Rotemberg, Julio J. & Woodford, Michael, 1999.
"The cyclical behavior of prices and costs,"
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135
When requesting a correction, please mention this item's handle: RePEc:ise:isegwp:wp242006. 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: (Vitor Escaria)
If references are entirely missing, you can add them using this form.