Private and public consumption: substitutes or complements?

Temporary and permanent government spending in an open economy

Joao Jalles and Georgios Karras

Oxford Economic Papers, 2022, vol. 74, issue 3, 805-819

Abstract: This article investigates the degree to which government consumption expenditures substitute or complement private consumption, one of the most important (and most overlooked) determinants of the fiscal multiplier. Using panel datasets from a large number of heterogeneous economies over 1970–2016, we find that private and government consumption are best described as complementary both in the aggregate and for nine different categories of government spending we consider. The degree of complementarity, however, differs substantially across government spending categories, being the highest for education, recreation, and housing in the Organisation for Economic Co-Operation and Development (OECD); and for Public Order and Recreation in the non-OECD. Our estimates imply that fiscal multiplier values in those spending categories are substantially higher than in categories that are less (or not at all) complementary with private consumption.

JEL-codes: C33 E21 E62 H11 H50 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gpab049 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:oxecpp:v:74:y:2022:i:3:p:805-819.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by James Forder and Francis J. Teal

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().