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Government Spending On Public Goods, Specialization-Based External Economies And Pattern Of Trade

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  • SAJID ANWAR

    (Adelaide Graduate School of Business, University of Adelaide, 233 North Terrace, SA 5005, Australia;
    International Graduate School of Business, University of South Australia, Adelaide, SA 5001, Australia)

Abstract

This paper examines the link between government spending on a public good and pattern of trade in the presence of specialization-based external economies. The results presented in this paper are based on a simple model of an economy that produces one industrial, one agricultural, one public good and a large number of varieties of professional services. It is shown that, when the agricultural and the public goods are non-traded, the country where government spending is relatively large is a net-exporter of varieties of professional services; if varieties of professional services are equally (or more) capital intensive as compared to the industrial good. When the public good and varieties of professional services are non-traded, the country where government spending is relatively large may export the industrial good in exchange for the agricultural good; if the combined capital intensity of professional services and the industrial good is greater than the capital intensity of the agricultural good and the size of specialization-based external economies is sufficiently small.

Suggested Citation

  • Sajid Anwar, 2006. "Government Spending On Public Goods, Specialization-Based External Economies And Pattern Of Trade," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 51(01), pages 19-30.
    • Handle: RePEc:wsi:serxxx:v:51:y:2006:i:01:n:s0217590806002202
    DOI: 10.1142/S0217590806002202
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    References listed on IDEAS

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    1. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, April.
    2. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers Archive 11375, Iowa State University, Department of Economics.
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