Government Spending and the Optimal Rates of Consumption and Capital Accumulation

Slobodan Djajic

Working Paper from Economics Department, Queen's University

Abstract: This paper investigates the effects of a temporary change in government expenditures on private consumption and investment. The model employed is one of a closed economy populated by infinitely-lived, utility-maximizing individuals. The analysis focuses on the implications of alternative assumptions concerning the relationship between public and private consumption in the household's utility function. A temporary increase in government expenditure reduces investment if public and private goods are Edgeworth complements or independent. However, if they are substitutes, there is a possibility of an increase in investment.

Pages: 15 pages
Date: 1987
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:681

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