TY  - JOUR
AU  - Giavazzi,Francesco
AU  - McMahon,Michael
TI  - The Households Effects of Government Consumption
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17837
PY  - 2012
Y2  - February 2012
UR  - http://www.nber.org/papers/w17837
L1  - http://www.nber.org/papers/w17837.pdf
N1  - Author contact info:
Francesco Giavazzi
Universita' Bocconi and IGIER
Via Guglielmo Röntgen, 1
Milan 20136
ITALY
Tel: 0039-02-5836-3304
Fax: 0039-02-5836-3302
E-Mail: francesco.giavazzi@unibocconi.it

Michael McMahon
Department of Economics
University of Warwick
Coventry
CV4 7AL
UK
E-Mail: m.mcmahon@warwick.ac.uk
M1  - published as Francesco Giavazzi, Michael McMahon. "The Household Effects of Government Spending," in Alberto Alesina and Francesco Giavazzi, editors, "Fiscal Policy after the Financial Crisis" University of Chicago Press (2013)

M3  - presented at "Fiscal Policy after the Financial Crisis", December 12-13, 2011
AB  - 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.
ER  -