Public consumption composition in a growing economy

Roberto Censolo and Caterina Colombo ()

Journal of Macroeconomics, 2008, vol. 30, issue 4, 1479-1495

Abstract: This paper explores the role of the composition of public consumption within a three sector R&D growth model. A competitive industry supplies a homogeneous good and a monopolistic sector manufactures a composite commodity differentiated in many varieties, whose size can be increased through investment in R&D. We investigate the effects of changes in the level and in the composition of public consumption on the steady state and on the economy's transitional dynamics. By varying the aggregate composition of demand, the government can effectively move resources away from the traditional industry to foster innovation. Welfare effects are also evaluated. We show that the composition of government consumption affects the entire time path of utility.

Keywords: Public; consumption; Demand; composition; Growth; Fiscal; policy (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:30:y:2008:i:4:p:1479-1495

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