Productive public expenditure and imperfect competition with endogenous price markup

Chen, Jhy-hwa; Shieh, Jhy-yuan; Lai, Ching‐chong; Chang, Juin‐jen

doi:10.1093/oep/gpi017

Cited by 13 publications

(8 citation statements)

References 29 publications

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“…As in Dixon (), Mankiw (), Lockwood (), Chen et al . (), Yoshida and Kenmochi (), and Yoshida and Turnbull (), we assume the following Cobb–Douglas utility function in order to derive closed‐form expressions for demand, welfare, etc. :

U = Z^{α} X^{1 - α}, 0 < α < 1.

Taking labor as the numeraire , the household's budget constraint is written as

P_{Z} Z = 1 - X + Π - T,

where

P_{Z}

is the price of the final good,

1 - X

is labor supply,

normalΠ

is aggregate profit income distributed by monopolistic firms, and

T

is a lump‐sum tax.…”

Section: A General Equilibrium Model With Imperfect Competitionmentioning

confidence: 99%

“…On the other hand, Chen et al . () studied the income multiplier effects of a rise in government spending on productive public goods which influence production of differentiated final consumption goods by monopolistic firms. They found that the short‐run and long‐run multiplier effects depend on whether the public goods and labor input are technical substitutes or complements for each other.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Optimal provision of public intermediate goods with imperfect competition: A note

Yoshida

Turnbull

2018

Int J of Economic Theory

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In a model where a public intermediate good and differentiated private intermediate goods produce a final good, this paper explores multiplier effects on aggregate output of the private goods of the public good, and the optimal level of government spending on it. When it provides a Hicks-neutral enhancement of productivities of private inputs, its second-best level is identical to its first-best level because the multiplier effect is independent of its level. However, when the public good is non-neutral, the second-best supply level is lower (higher) than the first-best when it is purely goods-saving (labor-saving).

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U = Z^{α} X^{1 - α}, 0 < α < 1.

Taking labor as the numeraire , the household's budget constraint is written as

P_{Z} Z = 1 - X + Π - T,

where

P_{Z}

is the price of the final good,

1 - X

is labor supply,

normalΠ

is aggregate profit income distributed by monopolistic firms, and

T

is a lump‐sum tax.…”

Section: A General Equilibrium Model With Imperfect Competitionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Optimal provision of public intermediate goods with imperfect competition: A note

Yoshida

Turnbull

2018

Int J of Economic Theory

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“…Chen et al . () shed light on the role of productive public expenditure, and find that fiscal expansions lead to significant increases in consumption if public infrastructure and labour are technical complements and the degree of complementarity is sufficiently large. Linnemann () considers the nonseparability between consumption and leisure in the utility function and consumption and leisure are substitutes for the representative agent.…”

Section: The Fiscal Effect On Consumption and The Real Wagementioning

confidence: 99%

“…This result can be further explained as follows. As is well known, the effects of government spending on the economy can also be governed and determined by other mechanisms, such as utility complementarity between private consumption and public consumption, or that government spending has a positive effect on private production that are present in other contributions, such asChen et al (2005),Linnemann (2006) andGanelli and Tervala (2009).…”

mentioning

confidence: 99%

Fiscal Stimulus and Endogenous Firm Entry in a Monopolistic Competition Macroeconomic Model

2017

Self Cite

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This paper sets up a monopolistic competition model featuring the returns to production specialization. Some novel results are derived from the analysis. First, the effect of a fiscal stimulus on consumption may be positive or negative, depending crucially upon whether the production function is characterized by increasing or decreasing returns to production specialization. Second, following a fiscal expansion, increasing returns to specialization lead to a positive linkage between real wages and aggregate output, while decreasing returns to specialization result in a negative relationship between real wages and aggregate output. Third, a fiscal expansion may raise social welfare, provided that the degree of increasing returns to production specialization is sufficiently large.

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“…The fiscal multiplier has been evaluated both in the short run and in the long run (Startz, 1989; Heijdra & van der Ploeg, 1996; Dixon & Lawler, 1996) under alternative types of taxation (Molana & Moutos, 1992; Heijdra et al , 1998). Additional effects of government expenditure have also been included when public consumption enters private utility (Heijdra et al , 1998) or government spending plays a productive role in private production (Chen et al , 2005). Moreover, policy‐induced change in market structure may significantly affect the size of the multiplier in an imperfectly competitive model with endogenous markup (Molana & Zhang, 2001; Costa, 2004).…”

Section: Introductionmentioning

confidence: 99%

Mixed Industrial Structure and Short‐run Fiscal Multiplier

Censolo

Colombo

2008

Australian Economic Papers

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Existing studies on the fiscal multiplier under imperfect competition assume a symmetric market structure with identical firms. This paper examines the fiscal policy implications of introducing a multisectoral economy, where a composite commodity is offered in many varieties within a market of monopolistic competition and a homogeneous good is produced in a perfectly competitive environment. Within the context of this mixed industrial structure we show that the size of the short-run multiplier crucially depends on the composition of public expenditure chosen by the government. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd/University of Adelaide and Flinders University.

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Productive public expenditure and imperfect competition with endogenous price markup

Cited by 13 publications

References 29 publications

Optimal provision of public intermediate goods with imperfect competition: A note

Optimal provision of public intermediate goods with imperfect competition: A note

Fiscal Stimulus and Endogenous Firm Entry in a Monopolistic Competition Macroeconomic Model

Mixed Industrial Structure and Short‐run Fiscal Multiplier

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