The Household Effects of Government Spending

Francesco Giavazzi () and Michael McMahon

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper provides new evidence on the e ects of scal policy by studying, using household-level data, how households respond to shifts in government spending. Our identi cation strategy allows us to control for time-speci c aggregate e ects, such as the stance of monetary policy or the U.S.-wide business cycle. However, it potentially prevents us from estimating the wealth e ects associated with a shift in spending. We nd signi cant heterogeneity in households’ response to a spending shock; the e ects appear vary over time depending, among other factors, on the state of business cycle and, at a lower frequency, on the composition of employment (such as the share of workers in part-time jobs). Shifts in spending could also have important distributional e ects that are lost when estimating an aggregate mul- tiplier. Heads of households working relatively few (weekly) hours, for instance, su er from a spending shock of the type we analyzed: their consumption falls, their hours increase and their real wages fall.

JEL-codes: D12 E21 E24 E62 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2012-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... zzi_mcmahon_2012.pdf (application/pdf)

Related works:
Chapter: The Household Effects of Government Spending (2012)
Working Paper: The Household Effects of Government Spending (2012)
Working Paper: The Household Effects of Government Spending (2012)
Working Paper: The Household Effects of Government Spending (2012)
Working Paper: The household effects of government spending (2012)
Working Paper: The Household Effects of Government Spending (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2012-02

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