Productive government spending and private consumption: a pessimistic view

Juha Tervala ()
Additional contact information
Juha Tervala: University of Helsinki

Economics Bulletin, 2009, vol. 29, issue 1, 416-425

Abstract: This paper analyses the consequences of productive government spending on private consumption. In a related work, Linnemann and Schabert (2006) found that a moderate output elasticity of government expenditures is sufficient to generate a positive consumption response to a fiscal shock. It is shown in this paper that pessimism as to the ability of productive government spending to account for an empirically observed positive consumption response is in order because a balanced budget increase in government spending increases private consumption only if the productivity of government spending is relatively high. For realistic values of the output elasticity of government spending, a positive consumption response is ruled out.

JEL-codes: E6 H3 (search for similar items in EconPapers)
Date: 2009-03-24
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I1-P43.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-08h30005

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().