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Studies in Nonlinear Dynamics & Econometrics

Ed. by Mizrach, Bruce

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Volume 21, Issue 2

Issues

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

Cheng-Wei Chang
  • Corresponding author
  • Institute of Economics, Academia Sinica, Nankang, Taipei 115, Taiwan, Phone: 886-2-27822791 ext. 516, Fax: 886-2-27853946
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  • Other articles by this author:
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/ Ching-Chong Lai
  • Institute of Economics, Academia Sinica, Taiwan
  • Department of Economics, National Cheng Chi University, Taiwan
  • Department of Economics, Feng Chia University, Taiwan
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Published Online: 2016-07-28 | DOI: https://doi.org/10.1515/snde-2016-0002

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

JEL Classification: E30; E32

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About the article

Published Online: 2016-07-28

Published in Print: 2017-04-01


Citation Information: Studies in Nonlinear Dynamics & Econometrics, Volume 21, Issue 2, 20160002, ISSN (Online) 1558-3708, ISSN (Print) 1081-1826, DOI: https://doi.org/10.1515/snde-2016-0002.

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