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International Factor Mobility, Government Size and Welfare
Sajid Anwar1; Mingli Zheng2
Source PublicationAustralian Economic Papers

An examination of the available data reveals that the size of government varies considerably across time and countries. By making use of a simple general equilibrium model, this paper demonstrates that size of government is affected by the availability of capital and labour within an economy. Specifically, this paper utilises a model of a closed economy that produces one‐private and one‐public good. Both goods are produced by means of capital and labour. Production functions are subject to constant returns to scale and perfect competition prevails in all markets. The elasticity of substitution between the public and the private good is greater than unity and there is no international factor mobility in the initial equilibrium. The size of government is measured by total spending on the public good as a proportion of the total expenditure on the private and public goods. It is shown that capital (labour) inflow can decrease (increase) the size of government. Capital inflow increases welfare if the private good is relatively capital intensive whereas labour inflow increases welfare if the public good is relatively capital intensive.

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Document TypeJournal article
CollectionFaculty of Social Sciences
Affiliation1.James Cook University University of South Australia
2.University of Macau
Recommended Citation
GB/T 7714
Sajid Anwar,Mingli Zheng. International Factor Mobility, Government Size and Welfare[J]. Australian Economic Papers,2004,43(2).
APA Sajid Anwar,&Mingli Zheng.(2004).International Factor Mobility, Government Size and Welfare.Australian Economic Papers,43(2).
MLA Sajid Anwar,et al."International Factor Mobility, Government Size and Welfare".Australian Economic Papers 43.2(2004).
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