Author(s):
Costa, Luís F. 
; Palma, Nuno
Date: 2006
Persistent ID: http://hdl.handle.net/10400.5/2648
Origin: Repositório da UTL
Subject(s): Endogenous markup
Document details
Productive public expenditure and imperfect competition with endogenous price m...
Description
In a recent article Chen et al. (2005) analyse the role of government expenditure in an imperfectly competitive static model, introducing a government-expenditure externality through the production function. Our purpose in the present paper is to argue that the claim from the authors that their model generates an endogenous markup is in our view incorrect. We argue that their model does not contain an endogenous markup, but a fixed one and that their claim is based upon an incorrect interpretation of what is the marginal cost in their own model.
In a recent article Chen et al. (2005) analyse the role of government expenditure in an imperfectly competitive static model, introducing a government-expenditure externality through the production function. Our purpose in the present paper is to argue that the claim from the authors that their model generates an endogenous markup is in our view incorrect. We argue that their model does not contain an endogenous markup, but a fixed one and that their claim is based upon an incorrect interpretation of what is the marginal cost in their own model.
Document Type
Other
Language English
Language English
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