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Sectoral intermediate goods and redistributive effects of economic policies

Valeriu Nalban

Journal of Macroeconomics, 2018, vol. 58, issue C, 292-307

Abstract: We study the redistributive effects of monetary and fiscal policies in a limited-heterogeneity model. It features two types of households and two types of intermediate firms, with savers being employed exclusively by capital-intensive producers and spenders by labor-intensive producers. Following a monetary or a fiscal expansion, consumption inequality decreases temporary: policy shocks generate higher benefits for hand-to-mouth households through increases in their labor income, outweighing the direct savings–consumption substitution effects for the optimizing households. The reduction in consumption inequality is higher the more complementary sectoral intermediate goods are, that is when a more balanced composition of the two sectoral goods is required for final good production. As compared to a single-firm model, in our two-firm, two-household model the effects on relative consumption are attenuated; this suggests a potential overestimation of redistributive effects in homogeneous-firm models.

Keywords: Heterogeneity; Consumption inequality; General equilibrium; Monetary policy; Fiscal policy (search for similar items in EconPapers)
JEL-codes: D3 D5 E2 E5 E6 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.jmacro.2018.10.003

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Handle: RePEc:eee:jmacro:v:58:y:2018:i:c:p:292-307