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

Cristiano Cantore and Lukas Freund

No 858, Bank of England working papers from Bank of England

Abstract: This paper develops a tractable capitalist-worker New Keynesian model to study the interaction of fiscal policy and household heterogeneity. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model matches empirical intertemporal marginal propensities to consume that shape the private sector’s dynamic response to policy interventions, it avoids implausible profit income effects on labor supply and the solution has robust stability properties. This setup delivers both more pronounced redistributive and more muted aggregate effects of fiscal stimulus relative to the traditional two-agent model.

Keywords: Business cycles; determinacy; government spending shocks; fiscal policy; New Keynesian; labor share; redistribution. (search for similar items in EconPapers)
JEL-codes: C52 E12 E25 E32 E62 (search for similar items in EconPapers)
Pages: 80 pages
Date: 2020-04-24
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... e-redistribution.pdf Full text (application/pdf)

Related works:
Journal Article: Workers, capitalists, and the government: fiscal policy and income (re)distribution (2021)
Working Paper: Workers, Capitalists, and the Government: Fiscal Policy and Income (Re)Distribution (2020)
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:boe:boeewp:0858

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team (webmaster@bankofengland.co.uk).