Arbeitspapier
Public infrastructures, public consumption and welfare in a new open economy macro model
This paper focuses on the trade-off faced by governments in deciding the allocation of public expenditures between productivity-enhancing public infrastructures and utility-enhancing public consumption in a two-country model. The results show that a permanent increase in the domestic stock of public capital financed by a reduction in public consumption raises domestic welfare if the productivity of public capital is high and the weight of public consumption in private utility is low compared with private consumption. The effect on foreign welfare is negative in the short run, but positive in the long run. This implies that, if foreign authorities care not only about the present discounted value of welfare but also about welfare dynamics, a permanent domestic reallocation of public spending might result in a virtuous global technological cycle.
- ISBN
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978-952-462-497-8
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Finland Research Discussion Papers ; No. 8/2009
- Classification
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Wirtschaft
Fiscal Policy
Open Economy Macroeconomics
Publicly Provided Private Goods
National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock
- Subject
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public spending composition
welfare
imperfect competition
nominal rigidities
- Event
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Geistige Schöpfung
- (who)
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Ganelli, Giovanni
Tervala, Juha
- Event
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Veröffentlichung
- (who)
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Bank of Finland
- (where)
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Helsinki
- (when)
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2009
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Ganelli, Giovanni
- Tervala, Juha
- Bank of Finland
Time of origin
- 2009
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