Substitution between Public and Private Consumption: Theory and Evidence on the Role of Nonhomothetic Preferences
使用允许非齐次偏好的广义CES效用函数，研究公共消费与私人消费的关系，发现两者是总互补品，并讨论了财政政策含义。
Abstract This paper assumes a generalized Constant Elasticity of Substitution (CES) utility function, which allows for nonhomothetic preferences, to study the relationship between public and private consumption. This captures that the optimal ratio of government and private consumption may also depend on income and not exclusively on relative prices, hence correcting for a potential bias when estimating the degree of substitutability. We demonstrate the importance of nonhomotheticity using a cointegration‐panel approach and data from 16 Latin American and Caribbean countries from 1980 to 2014. Our results suggest that private and public consumption are gross complements. Fiscal policy implications are discussed.