Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5083758 | International Review of Economics & Finance | 2013 | 22 Pages |
Abstract
Should governments only purchase domestic goods to increase welfare? And would government spending be higher if it was used for domestic goods only? Such proposals, which we call Buy National, were discussed in many countries in the context of the fiscal stimuli used to fight the recent global recession. We augment a simple trade model by government spending and find that the optimal size of government spending of Buy National is higher than the optimal level of government spending that does also include foreign-produced goods (Buy International). However, even though the optimal level of government spending is higher, real GDP and hence welfare are both lower in the Buy National regime.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Mario Larch, Wolfgang Lechthaler,