Public Expenditure and International Specialisation
We study the impact of home-biased public expenditure on international specialisation in general equilibrium models with increasing returns and monopolistic competition. It is found that home-biased procurement attracts increasing-returns industries to the home country (the "pull" effect) and attenuates the overall degree of industrial specialisation (the "spread" effect). Empirical evidence based on input-output data for the European Union confirms the existence of these links between public expenditure and the location of manufacturing activities.
|Date of creation:||Sep 2000|
|Date of revision:|
|Publication status:||Published in European Economic Review, vol. 48 (4), August 2004, pp. 851-881|
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