The Heterogeneous Effects of Government Spending
It’s All About Taxes
Bibliographic Data
| ID | 19037326 |
|---|---|
| Authors | Axelle Ferrière (0000-0001-9060-5377, Paris School of Economics-CNRS, corresponding author), Gastón Navarro (Federal Reserve Board of Governors) |
| Year | 2024 |
| Volume | 92 |
| Issue | 2 |
| Pages | 1061-1125 |
| Publication date | 2024-04-02 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Review of Economic Studies (JOURNAL) |
| Journal identifiers | ISSN: 0034-6527 • E-ISSN: 1467-937X |
| Publisher | Oxford University Press (OUP) (PUBLISHER) |
| DOI | 10.1093/restud/rdae032 |
| OpenAlex | W3123277949 |
| Language | EN |
| Citations received | 5 |
| References cited | 72 |
Historically, large changes in U.S. government spending induced fiscal efforts that were not all alike, with some using more progressive taxes than others. We develop a heterogeneous-agent New Keynesian model to analyse how the distribution of taxes across households shapes spending multipliers. The model yields empirically realistic distributions in marginal propensities to consume and labour elasticities, which result in lower responsiveness to tax changes for higher-income earners. In turn, multipliers are larger when spending is financed with higher tax progressivity—that is, when the tax burden falls more heavily on higher-income earners. This result is historically material. We estimate that, on average, tax rates increased more for top-income than for bottom-income earners after a spending shock. Thus, the typical U.S. spending shock was financed with higher tax progressivity. We further exploit the historical variation in the financing of spending to estimate progressivity-dependent multipliers, which we find consistent with the model
Economics · Fiscal policy · Government spending · Labour economics · Macroeconomics · Monetary economics · Monetary policy · New Keynesian economics · Welfare · Financial Literacy, Pension, Retirement Analysis · Fiscal Policy and Economic Growth · Monetary Policy and Economic Impact
Risk Shocks
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Estimation and Inference of Impulse Responses by Local Projections
Estimating the Effect of Unearned Income on Labor Earnings, Savings, and Consumption
Fiscal Stimulus in a Monetary Union
An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output
Using Elasticities to Derive Optimal Income Tax Rates
What are the effects of fiscal policy shocks?
Inflation dynamics
Understanding the Effects of Government Spending on Consumption
Shocks and Frictions in US Business Cycles
The Macroeconomic Effects of Tax Changes
Macroeconomic Effects From Government Purchases and Taxes
Measuring the Output Responses to Fiscal Policy
A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix
Estimating Labor Supply Responses Using Tax Reforms
The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions
Labor Supply and Taxes
MPCs, MPEs, and Multipliers
Income Inequality in the United States, 1913-1998
Distributional National Accounts
Sticky Prices in the United States
Intertemporal Substitution in Labor Supply
When Is the Government Spending Multiplier Large
What Happens When You Tax the Rich? Evidence from Executive Compensation
The Effects of Taxation on Risk Taking
Income and Wealth Heterogeneity in the Macroeconomy
Government Spending Multipliers in Good Times and in Bad
An Empirical Model of Labor Supply in a Life-Cycle Setting
Tax Cuts for Whom? Heterogeneous Effects of Income Tax Changes on Growth and Employment
Welfare Reform in European Countries
By How Much Does GDP Rise If the Government Buys More Output
Identifying Government Spending Shocks
| Unique citing works | 5 |
|---|---|
| Citations per year | 2.5 |
| Citation span | 2024 - 2025 (2) |
| Citation velocity | recent |
| Highly cited | No |
| Citation types | Neutral: 5 |