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The household effects of government spending
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Giavazzi, Francesco and McMahon, Michael F. (2012) The household effects of government spending. Working Paper. Coventry: Department of Economics, University of Warwick. Warwick economics research paper series (TWERPS) (Number 977). (Unpublished)
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Text (Working paper)
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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
This paper provides new evidence on the effects of fiscal policy by studying, using household-level data, how households respond to shifts in government spending. Our identification strategy allows us to control for time-specific aggregate effects, such as the stance of monetary policy or the U.S.-wide business cycle. However, it potentially prevents us from estimating the wealth effects associated with a shift in spending. We find significant heterogeneity in households’ response to a spending shock; the effects appear vary over time depending, among other factors, on the state of business cycle and, at a lower frequency, on the composition of employment (such as the share of workers in part-time jobs). Shifts in spending could also have important distributional effects that are lost when estimating an aggregate multiplier. Heads of households working relatively few (weekly) hours, for instance, suffer from a spending shock of the type we analyzed: their consumption falls, their hours increase and their real wages fall.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | H Social Sciences > HB Economic Theory | ||||
Divisions: | Faculty of Social Sciences > Economics | ||||
Library of Congress Subject Headings (LCSH): | Economics -- Sociological aspects, Fiscal policy, Finance, Public, Cost and standard of living, Economic impact analysis | ||||
Series Name: | Warwick economics research paper series (TWERPS) | ||||
Publisher: | Department of Economics, University of Warwick | ||||
Place of Publication: | Coventry | ||||
Official Date: | 31 January 2012 | ||||
Dates: |
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Number: | Number 977 | ||||
Number of Pages: | 38 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Unpublished | ||||
Date of first compliant deposit: | 1 August 2016 | ||||
Date of first compliant Open Access: | 1 August 2016 |
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