The Households Effects of Government Consumption

Francesco Giavazzi () and Michael McMahon

No 17837, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper provides new evidence on the effects of fiscal policy by studying, using household-level data, how households respond to shifts in government spending. Our identification strategy allows us to control for time-specific aggregate effects, such as the stance of monetary policy or the U.S.-wide business cycle. However, it potentially prevents us from estimating the wealth effects associated with a shift in spending. We find significant heterogeneity in households' response to a spending shock; the effects 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 effects that are lost when estimating an aggregate multiplier. Heads of households working relatively few (weekly) hours, for instance, suffer 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)
Date: 2012-02
New Economics Papers: this item is included in nep-bec and nep-cba
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as The Household Effects of Government Spending , Francesco Giavazzi, Michael McMahon. in Fiscal Policy after the Financial Crisis , Alesina and Giavazzi. 2013

Downloads: (external link)
http://www.nber.org/papers/w17837.pdf (application/pdf)

Related works:
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:nbr:nberwo:17837

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17837

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().