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The changing structure of goverment consumption spending

Alessio Moro and Omar Rachedi ()
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Omar Rachedi: Banco de España

No 1840, Working Papers from Banco de España, Working Papers Homepage

Abstract: We document a secular increase in the share of purchases from the private sector in government consumption spending: over time the government purchases relatively more private-sector goods, and relies less on its own production of value added. We build a general equilibrium model in which investment-specifi c technological change accounts for the changing structure of government spending. The model predicts that this secular process alters the transmission of government spending shocks by raising the response of private value added, while dampening the response of hours. We validate these results with novel empirical evidence on the effects of government spending across countries.

Keywords: government gross output; government wage bill; fi scal multiplier (search for similar items in EconPapers)
JEL-codes: E62 H10 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2018-11
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1840

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