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The direct substitution between government and private consumption in East Asia

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  • The direct substitution between government and private consumption in East Asia
  • Kwan, Yum K.
  • National Bureau of Economic Research


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Title The direct substitution between government and private consumption in East Asia
Similar Titles
Material Type Reports
Author(English)

Kwan, Yum K.

Publisher

Cambridge:National Bureau of Economic Research

Date 2006-08
Series Title; No NBER Working Paper Series / 12431
Pages 26
Subject Country Eastern Asia(Asia and Pacific)
South Korea(Asia and Pacific)
Language English
File Type Link
Original Format pdf
Subject Industry and Technology < General
Holding National Bureau of Economic Research

Abstract

We investigate empirically the extent to which government consumption substitutes for private consumption in nine East Asia countries. Panel cointegrating regression uncovers a significantly positive elasticity of substitution between government and private consumption, implying on average government and private consumption are substitutes in East Asia. Country-by-country analysis, however, reveals diversity in the substitutability estimates. The four North East countries – China, Hong Kong, Japan, and Korea – tend to share similar and moderate values of the substitution elasticity. For the five ASEAN countries studied in this paper, the relationship between private and government consumption vary substantially, both in the sign and magnitude of the elasticity of substitution. Private and government consumption in Malaysia and Thailand are strong substitutes, but they are found to be complements in Indonesia and Singapore. In between is the Philippines which has a near zero elasticity of substitution.