Macroeconomic (in)stability and endogenous market structure with productive government expenditure

Chang Cheng-Wei () and Ching-chong Lai
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Chang Cheng-Wei: Institute of Economics, Academia Sinica, Nankang, Taipei 115, Taiwan, Phone: 886-2-27822791 ext. 516, Fax: 886-2-27853946

Studies in Nonlinear Dynamics & Econometrics, 2017, vol. 21, issue 2, 16

Abstract: We consider the congestion effect of productive government spending in a monopolistic competition model with endogenous entry, and analyze the possibility of local indeterminacy. Some main findings emerge from the analysis. First, the indeterminacy condition is independent of the monopoly power. Second, productive government expenditure can be a source of local indeterminacy, while a higher degree of public goods congestion lessens the beneficial effect of productive government expenditure, and therefore reduces the possibility of indeterminacy. Third, a higher degree of internal returns to scale is associated with a lower possibility for the emergence of indeterminacy when production externalities are present.

Keywords: congestion; endogenous market structure; internal returns to scale; local indeterminacy; productive government expenditure (search for similar items in EconPapers)
JEL-codes: E30 E32 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/snde-2016-0002

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