Industry Evidence on the Effects of Government Spending
35 Pages Posted: 18 Mar 2011
There are 2 versions of this paper
Industry Evidence on the Effects of Government Spending
Industry Evidence on the Effects of Government Spending
Date Written: June 1, 2010
Abstract
This paper investigates industry-level effects of government purchases in order to shed light on the transmission mechanism for government spending on the aggregate economy. We begin by highlighting the different theoretical predictions concerning the effects of government spending on industry labor market equilibrium. We then create a panel data set that matches output and labor variables to shifts in industry-specific government demand. The empirical results indicate that increases in government demand raise output and hours, but lower real product wages and productivity. Markups do not change as a result of government demand increases. The results are consistent with the neoclassical model of government spending, but they are not consistent with the New Keynesian model of the effects of government spending.
Keywords: Government spending, transmission, hours, productivity, real wage
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Costly Capital Reallocation and the Effects of Government Spending
-
What are the Effects of Fiscal Policy Shocks?
By Harald Uhlig and Andrew Mountford
-
What are the Effects of Fiscal Policy Shocks?
By Andrew Mountford and Harald Uhlig
-
What are the Effects of Fiscal Policy Shocks?
By Andrew Mountford and Harald Uhlig
-
Understanding the Effects of Government Spending on Consumption
By Jordi Galí, David Lopez-salido, ...
-
Understanding the Effects of Government Spending on Consumption
By Jordi Galí, David Lopez-salido, ...