Government spending on public goods, specialization-bases external economies and pattern of trade
Date
2006
Authors
Anwar, Sajid
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Journal article
Citation
Singapore Economic Review, 2006; 51(1):19-30
Statement of Responsibility
Sajid Anwar
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Abstract
This paper examines the link between government spending on a public good and pattern of trade in the presence of specialization-based external economies. The results presented in this paper are based on a simple model of an economy that produces one industrial, one agricultural, one public good and a large number of varieties of professional services. It is shown that, when the agricultural and the public goods are non-traded, the country where government spending is relatively large is a net-exporter of varieties of professional services; if varieties of professional services are equally (or more) capital intensive as compared to the industrial good. When the public good and varieties of professional services are non-traded, the country where government spending is relatively large may export the industrial good in exchange for the agricultural good; if the combined capital intensity of professional services and the industrial good is greater than the capital intensity of the agricultural good and the size of specialization-based external economies is sufficiently small
School/Discipline
Business School
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© 2006 World Scientific Publishing Company