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Public expenditure and international specialisation. European Economic Review, forthcoming

By Marius Brülhart and Federico Trionfetti


We study the impact of home-biased public expenditure on international specialisation in general equilibrium models with increasing returns and monopolistic competition. It is found that home-biased procurement attracts increasing-returns industries to the home country (the “pull ” effect) and attenuates the overall degree of industrial specialisation (the “spread” effect). Empirical evidence based on input-output data for the European Union confirms the existence of these links between public expenditure and the location of manufacturing activities. JEL classification

Topics: public expenditure, international specialisation, economic geography, European Union, input-output analysis
Year: 2004
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