The consumption multiplier of government spending: the role of substitutability between government spending and leisure

Masataka Eguchi, Yuhki Hosoya and Mai Yamada

Economics Letters, 2024, vol. 235, issue C

Abstract: This paper presents an alternative explanation for the positive consumption response to government spending that is empirically observed, based on a non-separable utility function. We find that consumption can respond positively when leisure and government spending are substitutes.

Keywords: Fiscal multiplier; Non-separable preferences; Substitutability; Complementarity (search for similar items in EconPapers)
JEL-codes: E32 E60 E62 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:235:y:2024:i:c:s0165176524000417

DOI: 10.1016/j.econlet.2024.111557

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