Fiscal policy and the effects of government purchases : the case of the United Kingdom

Abstract

Seemingly little work has been done since Peacock and Stewart's article to distinguish between the two impacts of the Government on the economy through its purchasing function. By using statistics of inter-industry relations in the United Kingdom, they were able to show that public expenditure distributed among industrial sectors had both 'primary' and 'secondary' effects. More recently it has been shown that a knowledge of these indirect impacts may be helpful, viewed together with the circumstances of the time, in achieving accepted fiscal objectives. In the following analysis all figures are confined to the United Kingdom Government expenditure on goods and services in 1963, transfer payments being ignored. A refinement on the Peacock + Stewart exposition is that we include both gross domestic capital formation and current expenditure.