NBER Publications by Michael McMahon

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

Working Papers and Chapters

February 2012The Household Effects of Government Spending
with Francesco Giavazzi
in Fiscal Policy after the Financial Crisis, Alberto Alesina and Francesco Giavazzi, editors
This chapter examines how households respond to changes in a particular type of government spending: military contracts awarded by the Pentagon. Results show significant differences in the effects of government spending, depending on the state-specific unemployment rate. In states with relatively low unemployment, government spending could have insignificant or even negative effects on private consumption. In contrast, private consumption increases in high-unemployment states, suggesting that in such states, the multiplier is likely to be positive. Fiscal policy can have important distributional effects, since there is significant heterogeneity in households' responses to shifts in government spending.
The Households Effects of Government Consumption
with Francesco Giavazzi: w17837
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...

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

September 2010Comment on "Technology-Hours Redux: Tax Changes and the Measurement of Technology Shocks"
in NBER International Seminar on Macroeconomics 2010, Richard Clarida and Francesco Giavazzi, organizers
April 2008Policy Uncertainty and Precautionary Savings
with Francesco Giavazzi: w13911
In 1997 Chancellor Kohl proposed a major pension reform and pushed the law through Parliament explaining that the German PAYG system had become unsustainable. One limitation of the new law -- one that is crucial for our identification strategy -- is that it left the generous pension entitlements of civil servants intact. The year after, in 1998, Kohl lost the elections and was replaced by Gerhard Shroeder. One of the first decisions of the new Chancellor was to revoke the 1997 pension reform. We use the quasi-experiment of the adoption and subsequent revocation of the pension reform to study how households reacted to the increase in uncertainty about the future path of income that such an event produced. Our estimates are obtained from a diff-in-diff estimator: this helps us overcome the i...

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us