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Industrial structure and economic performance: The role of productive public expenditure
Author(s) -
Chang Chengwei
Publication year - 2019
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12562
Subject(s) - economics , monopoly , diversity (politics) , externality , welfare , preference , government (linguistics) , public spending , government spending , public expenditure , microeconomics , macroeconomics , public finance , market economy , linguistics , philosophy , sociology , politics , anthropology , political science , law
I consider productive government spending and preference for diversity in an imperfectly competitive macroeconomic framework, and analyze how differences in industrial structure affect economic growth and the welfare level. Two main findings emerge from the analysis. First, the optimal ratio of government spending is related to the extent of public expenditure externalities and preference for diversity. Second, the vertical separation regime leads to a higher economic growth rate and welfare level than the vertical integration regime, provided that the degree of monopoly power is relatively small.