The Effects of Public Expenditure on Private Consumption: A Disaggregated Analysis for Spain (1970-1997)

The main purpose of this article is to provide empirical evidence for Spain on the dependency relationship between government spending and private consumption at the disaggregated level. To this end, we will use two approaches that extend traditional consumption models, allowing for non-separability of consumers' preferences between public and private goods and services. The results obtained show significant links between public and private consumption and, in particular, they point towards the importance of carrying out the analysis at the disaggregated level: there is evidence that some components of public and private consumption act as substitutes, whereas others act as complements.