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- Title
THE EFFECT OF CHANGING SIZE AND COMPOSITION OF GOVERNMENT PURCHASES ON POTENTIAL OUTPUT: A COMMENT.
- Authors
Reid, Bradford G.
- Abstract
The article comments on the article "The Effect of the Changing Size and Composition of Government Purchases on Potential Output," by George M. von Furstenberg published in the February 1980 issue of the journal Review of Economics and Statistics. Furstenberg attempted to analyze the impact of government purchases on the steady state path of potential output. That analysis emphasized the effects of the composition of government purchases by explicitly permitting varying degrees of substitutability to exist between private and publicly-provided consumption and investment goods. The purpose of this short comment is to demonstrate that the savings relationship postulated by von Furstenberg yields several conclusions that are attributable not to a more complete specification of compositional effects on the expenditure side but rather to an incomplete specification of possible compositional effects on the revenue side of the government's budget constraint. Furstenberg's assertion that the marginal propensity to save must be unity if fiscal actions are not to affect steady state output is correct only within the context of his particular private savings function.
- Subjects
GOVERNMENT purchasing; INPUT-output analysis; PRODUCTION control; CONSUMPTION (Economics); VON Furstenberg, George M.; REVIEW of Economics &; Statistics (Periodical); INVESTMENTS; PUBLIC spending
- Publication
Review of Economics & Statistics, 1982, Vol 64, Issue 3, p525
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1925956