Nonseparable Preferences, Fiscal Policy Puzzles, and Inferior Goods

Florin O. Bilbiie

Journal of Money, Credit and Banking, 2009, vol. 41, issue 2-3, pages 443-450

Abstract: Nonseparable preferences over consumption and leisure can generate an increase in private consumption in response to government spending, as found in the data, in a frictionless business cycle model. However, the conditions on preferences required for these result to obtain hold if and only if the consumption good is inferior. Similarly, positive co-movement of consumption and hours worked occurs if and only if either consumption or leisure is inferior. Copyright (c) 2009 The Ohio State University.

Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:mcb:jmoncb:v:41:y:2009:i:2-3:p:443-450

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