Transfer Payments and the Macroeconomy: The Effects of Social Security Benefit Increases, 1952-1991

Christina D. Romer and David Romer

American Economic Journal: Macroeconomics, 2016, vol. 8, issue 4, 1-42

Abstract: This paper uses Social Security benefit increases from 1952 to 1991 to investigate the macroeconomic effects of changes in transfers. It finds a large, immediate, and significant positive response of consumption to permanent benefit increases. The response declines after about five months, and does not appear to spread to industrial production or employment. The effects of transfers are faster, but much less persistent and much smaller overall, than those of tax changes. Finally, monetary policy responds strongly to benefit increases but not to tax changes. This may account for the failure of the effects of transfers to persist or spread.

JEL-codes: E21 E62 E63 H31 H55 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/mac.20140348
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Citations: View citations in EconPapers (35)

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