Government spending on public infrastructure,prices, production and international trade |
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| Institution: | 1. Institute of Geological Sciences, Polish Academy of Sciences, Research Centre in Kraków, Senacka St. 1, PL-31002 Kraków, Poland;2. Sedimentology and Environmental Geology, Geoscience Center, University of Göttingen, Goldschmidtstrasse 3, D-37077 Göttingen, Germany;3. University of Zagreb, Faculty of Mining, Geology and Petroleum Engineering, Pierottijeva 6, HR-10000 Zagreb, Croatia;4. Geolog d.o.o. and Croatian Geological Summer School, Pan?i?eva 5, HR-10000 Zagreb, Croatia |
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| Abstract: | This paper examines the impact of a change in government spending on public infrastructure when monopolistic competition prevails in one sector of the economy. The analysis is based on a variation of the Spence-Dixit-Stiglitz model where the presence of internal economies in the production of a differentiated intermediate good leads to specialization based external economies in the production of the final good. It is shown that changes in government spending on public infrastructure can influence relative prices, production, the degree of specialization, and pattern of international trade. |
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