Heterogeneous Consumers and Fiscal Policy Shocks

Barbara Rossi, Atsushi Inoue and Emily Anderson

No 9631, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies stylized empirical facts regarding the effects of unexpected changes in aggregate macroeconomic fiscal policies on consumers that are allowed to differ depending on their individual characteristics. We use data from the Consumption Expenditure Survey (CEX) to estimate individual-level impulse responses as well as multipliers for government spending and tax policy shocks. The main empirical finding of this paper is that unexpected fiscal shocks have substantially different effects on consumers depending on their age, income levels, and education. In particular, the wealthiest individuals tend to behave according to the predictions of standard RBC models, whereas the poorest individuals tend to behave according to standard IS-LM (non-Ricardian) models, due to credit constraints. Furthermore, government spending policy shocks tend to decrease consumption inequality, whereas tax policy shocks most negatively affect the lives of the poor, more so than the rich, thus increasing consumption inequality.

Keywords: Fiscal policy; Government spending shocks; Heterogeneity; Tax shocks (search for similar items in EconPapers)
JEL-codes: D1 E21 E4 E52 H31 I3 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Heterogeneous Consumers and Fiscal Policy Shocks (2016)
Working Paper: Heterogeneous Consumers and Fiscal Policy Shocks (2015)
Working Paper: Heterogeneous consumers and fiscal policy shocks (2015)
Working Paper: Heterogeneous Consumers and Fiscal Policy Shocks (2012)
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