Year: 2011
Type: report
Abstract: Between 2007 and 2009, government expenditures increased rapidly across the OECD countries.While economic research on the impact of government purchases has flourished, in the data, about three quarters of the increase in expenditures in the United States (and more in other countries) was in government transfers.We document this fact, and show that the increase in U.S. spending on retirement, disability, and medical care has been as high as the increase in government purchases.We argue that future research should focus on the positive impact of transfers.Towards this, we present a model in which there is no representative agent and Ricardian equivalence does not hold because of uncertainty, imperfect credit markets, and nominal rigidities.Targeted lump-sum transfers are expansionary both because of a neoclassical wealth effect and because of a Keynesian aggregate demand effect.
DOI: 10.3386/w16775
Authors: Hyunseung Oh, Ricardo Reis
Institutions: Columbia University, Centre for Economic Policy Research
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3124304633