Elasticity of Substitution, Capital Inflow and Government Size

Sajid Anwar

Annals of Economics and Finance, 2006, vol. 7, issue 1, 145-156

Abstract: A number of recent studies have attempted to identify the determinants of government size. It is well known that the size of government has implications for welfare and economic growth. This paper shows that the size of the fixed cost involving public good provision affects the magnitude of capital inflow induced changes in government size and welfare. By making use of a simulation exercise, it is argued that capital inflow can decrease (increase) the size of government and welfare if the elasticity of substitution is sufficiently large (small).

Keywords: Producer Services; Public Goods; Capital Inflow; Elasticity of Substitution (search for similar items in EconPapers)
JEL-codes: F20 H19 H41 (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2006:v:7:i:1:p:145-156

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