Workers, capitalists, and the government: fiscal policy and income (re)distribution

Cristiano Cantore and Lukas Freund

Journal of Monetary Economics, 2021, vol. 119, issue C, 58-74

Abstract: We propose a novel two-agent New Keynesian model to study the interaction of fiscal policy and household heterogeneity in a tractable environment. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model is consistent with micro data on empirical intertemporal marginal propensities to consume, and it avoids implausible profit income effects on labor supply. Relative to the traditional two-agent model, these features imply, respectively, a lower sensitivity of consumption to the composition of public financing; and smaller fiscal multipliers alongside pronounced redistributive effects.

Keywords: Fiscal policy; Heterogeneity; HANK; TANK (search for similar items in EconPapers)
JEL-codes: E12 E21 E25 E32 E62 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (34)

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Related works:
Working Paper: Workers, capitalists, and the government: fiscal policy and income (re)distribution (2020)
Working Paper: Workers, Capitalists, and the Government: Fiscal Policy and Income (Re)Distribution (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:119:y:2021:i:c:p:58-74

DOI: 10.1016/j.jmoneco.2021.01.004

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