Big G

Lydia Cox, Gernot Müller, Ernesto Pasten, Raphael Schoenle and Michael Weber

Journal of Political Economy, 2024, vol. 132, issue 10, 3260 - 3297

Abstract: “Big G” typically refers to aggregate government spending on a homogeneous good. We confront this notion with five facts for the universe of federal purchases. First, they are volatile and account for the largest part of the short-run variation in total spending. Second, the origin of their variation is granular. Third, purchases are subject to procurement and bidding. Fourth, they are concentrated in long-term contracts. Fifth, their composition is biased toward sectors in which private sector prices are sticky. We develop a two-sector New Keynesian model consistent with these facts and find where the government spends is key for aggregate effects.

Date: 2024
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Related works:
Working Paper: Big G (2020)
Working Paper: Big G (2020)
Working Paper: Big G (2020)
Working Paper: Big G (2020)
Working Paper: Big G (2020)
Working Paper: Big G (2020)
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