Definition
The government expenditure UG / POP (making it per capita) is allocated to purchase by sectors with Cobb-Douglas function
Similar with the discussion on Cobb-Douglas function in the demand structure of regional household, the Cobb-Douglas function implies we assume the cost share across commodities are fixed. We think it is a reasonable assumption, and also it provides simplicity in modeling.
Linearized form
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Where:
- i belongs to TRAD_COMM
Note: the linearized form of demand and price can be obtained by the CES function with σ = 1.