Citation

Discussion Paper Details

Please find the details for DP9631 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Heterogeneous Consumers and Fiscal Policy Shocks

Author(s): Emily Anderson, Atsushi Inoue and Barbara Rossi

Publication Date: September 2013

Keyword(s): Fiscal policy, Government spending shocks, Heterogeneity and Tax shocks

Programme Area(s): International Macroeconomics

Abstract: This paper studies stylized empirical facts regarding the effects of unexpected changes in aggregate macroeconomic fiscal policies on consumers that are allowed to differ depending on their individual characteristics. We use data from the Consumption Expenditure Survey (CEX) to estimate individual-level impulse responses as well as multipliers for government spending and tax policy shocks. The main empirical finding of this paper is that unexpected fiscal shocks have substantially different effects on consumers depending on their age, income levels, and education. In particular, the wealthiest individuals tend to behave according to the predictions of standard RBC models, whereas the poorest individuals tend to behave according to standard IS-LM (non-Ricardian) models, due to credit constraints. Furthermore, government spending policy shocks tend to decrease consumption inequality, whereas tax policy shocks most negatively affect the lives of the poor, more so than the rich, thus increasing consumption inequality.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9631

Bibliographic Reference

Anderson, E, Inoue, A and Rossi, B. 2013. 'Heterogeneous Consumers and Fiscal Policy Shocks'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9631