@techreport{NBERw6283,
 title = "Costly Capital Reallocation and the Effects of Government Spending",
 author = "Valerie A. Ramey and Matthew D. Shapiro",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "6283",
 year = "1999",
 month = "April",
 URL = "http://www.nber.org/papers/w6283",
 abstract = {Changes in government spending often lead to significant shifts in demand across sectors.  This paper analyzes the effects of sector-specific changes in government spending in a two-sector dynamic general equilibrium model in which the reallocation of capital across sectors is costly.  The two-sector model leads to a richer array of possible responses of aggregate variables than the one-sector model.  The empirical part of the paper estimates the effects of military buildups on a variety of macroeconomic variables using a new measure of military shocks.  The behavior of macroeconomic aggregates is consistent with the predictions of a multi-sector neoclassical model.  In particular, consumption, real product wages and manufacturing productivity fall in response to exogenous military buildups in the post-World War II United States.},
}