This paper revisits the macroeconomic effects of government consumption in the neoclassical growth model augmented with idiosyncratic investment (or entrepreneurial) risk. Under complete markets, a permanent increase in government consumption has no long-run effect on the interest rate, the...

This study examines the business cycle behaviour of public consumption and its main components; the public wage bill (including compensation per employee and public employment) and intermediate consumption in the euro area aggregate, euro area countries and a group of selected non-euro area OECD...

Despite intense calls for safeguarding public investment in Europe, public investment expenditure, when measured in relation to GDP, has steadily fallen in the last three decades, evoking fears that economic activity may be correspondingly negatively aÞected. At the same time, however, public...