Electronic Resource
Springer
Empirical economics
22 (1997), S. 63-81
ISSN:
1435-8921
Keywords:
Marginal rate of substitution
;
crowding out
;
cointegration
;
error correction
;
E21
;
E62
Source:
Springer Online Journal Archives 1860-2000
Topics:
Economics
Notes:
Abstract This paper uses the life-cycle approach to derive an equilibrium intratemporal efficiency condition which relates the marginal utility of consumption of nondurable goods and services to the marginal utility of consumption of services from durable goods. Given this condition and the assumption that marginal utilities are affected by the level of public spending, a long-run relationship between components of private consumption and public expenditure is then postulated. The application of cointegration analysis to UK data supports the existence and uniqueness of such a long-run relationship, and estimates based on the error correction approach produce results which suggest that (i) a change in public spending has different effects on components of private consumption in the short-run, and (ii) the entire burden of long-run substitution falls on nondurable consumption.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1007/BF01188170
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