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Housework and fiscal expansions

Stefano Gnocchi (), Daniela Hauser () and Evi Pappa ()

Journal of Monetary Economics, 2016, vol. 79, issue C, 94-108

Abstract: In an otherwise-standard business cycle model with housework, calibrated consistently with data on time use, we discipline complementarity between consumption and hours worked and relate its strength to the size of fiscal multipliers. Evidence on the substitutability between home and market goods confirms that complementarity is an empirically relevant driver of fiscal multipliers. However, in a housework model substantial complementarity can be generated without imposing a low wealth effect, which contradicts the microeconomic evidence. Also, explicitly modeling housework matters for assessing the welfare effects of government spending, which are understated by theories that neglect substitutability between home-produced and market goods.

Keywords: Government expenditure shocks; Home production (search for similar items in EconPapers)
Date: 2016
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Working Paper: Housework and Fiscal Expansions (2014) Downloads
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DOI: 10.1016/j.jmoneco.2016.04.003

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