1,721,124 research outputs found
Composition of public expenditure, effective demand, distribution and growth
No full textWe introduce public expenditure (PE) in a general post Keynesian framework characterized by a non-linear investment function. Our aims are:1) to provide a systematic analysis of the effects of PE (‘productive' or ‘non productive') on economic growth within a post Keynesian framework in which effective demand plays a crucial role. Our work fills a lacuna in the post Keynesian literature given that scant attention has been devoted to this topic (an exception is Pressman 1995). Concerning Kaleckian models, the few formalisations involve the effects of PE on growth only via government debt (You and Dutt 1996) or deficits (Lavoie, 2000). As it is well known, the analysis of the effects of PE within Endogenous Growth models started with the seminal work of Barro (1990) and it has been successively developed in detail within that approach. Following Barro (1990) ‘Productive' PE is such since it enters in the production function affecting average factors productivity. More recently, Devarajan et al (1996) question Barro's approach. Following these authors PE is ‘productive' whenever it affects (positively) the rate of growth. In our paper, ‘Productive' Public Expenditure affects the (fixed) coefficients of production/average factors productivity similarly to Barro. We should note that in our analysis, due to the so-called ‘paradox of costs' (defined later), not necessarily an increase in the average factor productivity (following an increase in ‘Productive' PE) implies an increase in the rate of growth;2) to compare and contrast two post Keynesian approaches to endogenous growth, which stress the role of demand differently. The standard Keleckian approach is characterised by an autonomous (linear) investment function according to which investment is driven by i) (exogenous) long run expectations about the growth rate of demand; ii) expected profitability (proxied by the current rate of profit); iii) the expected level of demand (proxied by the current degree of capacity utilisation). The basic result of this approach is that in equilibrium effective demand drives growth. An important corollary is the so-called ‘paradox of thrift' according to which a reduction (an increase) in the average propensity to save of the economy, rising (reducing) the level of demand and the degree of capacity utilisation affects positively (negatively) capital accumulation and the equilibrium rate of growth of the economy. Introducing PE financed by income taxation and a balanced budged constraint, this effect could be induced by increasing (lowering) the tax rate. Another important corollary is the so-called ‘paradox of costs' according to which an increase (reduction) in the mark up and the redistribution in favour of profits (wages) reducing (increasing) the level of demand and the degree of capacity utilisation could dampen capital accumulation. With PE this effect could be induced by changes in productivity. In the Classical or Harrodian approach (as elaborated, among others, by Duménil and Lévy, 1999), long-run expectations are linked to saving decisions. The equilibrium rate of growth corresponds to the Harrodian ‘warranted rate of growth'.3) to reproduce a variety of complex phenomena (multiple equilibria, hysteresis, low growth traps, regular and irregular growth cycles), not uncommon in the real world, by introducing a simple nonlinearity in the investment function in the spirit of Kalecki's (1937) investment theory – based on the principle of increasing risk –, Kaldor's (1940) trade cycle model and Goodwin's (1951) non-linear accelerator. The specific shape of the investment function, often employed in the literature (see for example Chang and Smith, 1971; Varian, 1979; and more recently Gardini et al., 2006) is such that capital accumulation increases with the current degree of capacity along to a ‘S' shaped curve
Economic Integration and Agglomeration in a customs union in the presence of an outside region
No full textNew Economic Geography (NEG) models do not typically account for the presence of regions other than the ones involved in the integration process. We explore such a possibility in a Footloose Entrepreneur (FE) model aiming at studying the stability properties of long-run industrial location equilibria. We consider a world economy composed by a customs union of two regions (regions 1 and 2) and an “outside region” which can be regarded as the rest of the world (region 3). The effects of economic integration on industrial agglomeration within the customs union are studied under the assumption of a constant distance between the customs union itself and the third region. The results show that higher economic integration does not always implies the standard result of full agglomeration of FE models. This incomplete agglomeration outcome is due to the fact that the periphery region keeps a share of industrial activities in order to satisfy a share of “external demand”. That is, the deindustrialization process brought about by economic integration in the periphery of the union is mitigated by the demand of consumers living in the rest of the world. In general, the market size of the third region affects the number of the long-run equilibria, as well as their stability properties. In addition to the standard outcomes of FE models, we describe the existence of two asymmetric equilibria characterised by unequal distribution of firms between regions 1 and 2, with no full agglomeration though. Interestingly, these equilibria are stable and therefore can be regarded as a likely long-run equilibrium state of the economy
First Meeting COST Action IS1104 "The EU in the new complex geography of economic systems: models, tools and policy evaluation"
No full textThe new Economic Geography: an overview
No full textPresentazione dell'approccio della New Economic Geography alla teoria della distribuzione territoriale dell'attività produttiva
Footloose capital and productive public services
No full textThe incorporation of public expenditures in New Economic Geography (NEG) models represents a very recent theoretical advance. Brakman et al. (2005) claim the European Cohesion Policy to be incoherent since it seems sometime targeting towards geographical agglomeration, but more often towards dispersion of economic activity. Such a criticism provides a motivation to analyse policy issues in NEG models. The impact of public expenditures on the location decisions of firms has been studied within a few variants of NEG models. In particular, in a companion paper (Commendatore et al., 2008, Èconomie Internationale, forthcoming) our main focus is on industrial location and welfare effects of productive public services provision under the assumption of endogenous capital. The government uses tax revenues to purchase capital goods to use in the production of freely available public services. Hence, public policy can affect production in the manufacturing sector, via its impact on factors productivity. We show that the interplay of two effects determines the final impact of an increase in productive public spending in one region on the spatial distribution of firms: the demand effect and the productivity effect. On one hand, an increase in the provision of public services in one region enforces agglomeration in the same region; on the other hand it favors dispersion via a change in the relative market size. As a result, whether or not higher provision of public services leads firms to relocate in the backward region will depend on the way in which the two regions contribute to the financing of public expenditure. It is shown that the demand effect will be more than offset by the productivity effect only if the government lets the richer region' tax payers contribute on the basis of their contribution capacity.In this paper we provide further insights on how the interplay of the above mentioned productivity and demand effects influence industrial location in a much simpler analytical framework which allows fully characterizing the dynamic behavior of capital movements in response to variations in the degree of trade freeness and to policy induced changes. Extending Commendatore et al. (2008), we pay attention to the dynamic structure of the model. First, we fully characterize the dynamic process underlying capital movements (the footloose capital) and analyze the long-run equilibrium given as fixed point of the capital mobility dynamics for different degrees of trade freeness. Second, we study the impact of public services provision at the long-run interior equilibrium, as well as on the long term behavior of regional shares of capital.The paper is structured as follows. Section 2 provides empirical background. In section 3 we introduce the model's assumptions; section 4 presents the short run structure, explicitly specifying the capital migration process. Section 5 deals with dynamics. Section 6 presents results on the impact of the provision of public services on the long run allocation of capital across regions. Section 7 concludes
A 3-regions new economic geography model in discrete time: local and global dynamics properties
No full textPresentazione modello a tre regioni: studio delle proprietà di dinamica matematica relative alla stabilità locale e globale
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