Household production and taxation in the stochastic growth model

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Household production and taxation in the stochastic growth model

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Ellen McGrattan
Richard Rogerson
Randall Wright

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Abstract

We estimate a dynamic general equilibrium model of the U.S. economy that includes an explicit household production sector. We use these estimates to investigate two issues. First, we analyze how well the model accounts for aggregate fluctuations. Second, we use the model to study the effects of fiscal policy. We find household production has a significant impact, and reject a nested specification in which changes in the home production technology do not matter for market variables. The model generates very different predictions for the effects of tax changes than similar models without home production.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 166.

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Date of creation: 1993
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Handle: RePEc:fip:fedmsr:166

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Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22. [Downloadable!]
Other versions:
- Edward C. Prescott, 1986. "Theory ahead of business cycle measurement," Staff Report 102, Federal Reserve Bank of Minneapolis. [Downloadable!]
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Other versions:
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Other versions:
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Other versions:
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Other versions:
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McGrattan, Ellen R., 1994. "The macroeconomic effects of distortionary taxation," Journal of Monetary Economics, Elsevier, vol. 33(3), pages 573-601, June. [Downloadable!] (restricted)
Other versions:
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Other versions:
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Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Lars Peter Hansen & Ellen R. McGrattan & Thomas J. Sargent, 1994. "Mechanics of forming and estimating dynamic linear economies," Staff Report 182, Federal Reserve Bank of Minneapolis. [Downloadable!]
Other versions:
- Anderson, Evan W. & McGrattan, Ellen R. & Hansen, Lars Peter & Sargent, Thomas J., 1996. "Mechanics of forming and estimating dynamic linear economies," Handbook of Computational Economics, in: H. M. Amman & D. A. Kendrick & J. Rust (ed.), Handbook of Computational Economics, edition 1, volume 1, chapter 4, pages 171-252 Elsevier. [Downloadable!] (restricted)
Matt Klaeffling, 2003. "Macroeconomic modelling of monetary policy," Working Paper Series 257, European Central Bank. [Downloadable!]
Jang-Ting Guo & Kevin J. Lansing, 1994. "Tax structure, welfare, and the stability of equilibrium in a model of dynamic optimal fiscal policy," Working Paper 9410, Federal Reserve Bank of Cleveland. [Downloadable!]
Tor Einarsson & Milton Marquis, 2001. "Fiscal Policy and Human Capital Accumulation in a Home Production Economy," Contributions to Macroeconomics, Berkeley Electronic Press, vol. 1(contribut), pages 1022-1022. [Downloadable!] (restricted)
Jang-Ting Guo & Kevin J. Lansing, 1995. "Optimal taxation of capital income in a growth model with monopoly profits," Working Paper 9510, Federal Reserve Bank of Cleveland. [Downloadable!]
Craig Burnside & Martin Eichenbaum, 1994. "Small Sample Properties of Generalized Method of Moments Based Wald Tests," NBER Technical Working Papers 0155, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Craig Burnside & Martin Eichenbaum, 1994. "Small sample properties of generalized method of moments based Wald tests," Working Paper Series, Macroeconomic Issues 94-12, Federal Reserve Bank of Chicago.
Gwen Eudey & Roberto Perli, 1999. "Regime-switching in expectations over the business cycle," Working Papers 99-17, Federal Reserve Bank of Philadelphia. [Downloadable!]
Jang-Ting Guo & Kevin J. Lansing, 1994. "Tax structure, optimal fiscal policy, and the business cycle," Economic Review, Federal Reserve Bank of Cleveland, issue Q IV, pages 2-14. [Downloadable!]
John Y. Campbell & Sydney Ludvigson, 1998. "Elasticities of Substitution in Real Business Cycle Models with Home Production," NBER Working Papers 6763, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- John Y. Campbell & Sydney Ludvigson, 2000. "Elasticities of Substitution in Real Business Cycle Models with Home Production," Harvard Institute of Economic Research Working Papers 1900, Harvard - Institute of Economic Research. [Downloadable!]
- John Y. Campbell & Sydney Ludvigson, 1997. "Elasticities of substitution in real business cycle models with home production," Research Paper 9733, Federal Reserve Bank of New York. [Downloadable!]
- Campbell, John Y & Ludvigson, Sydney, 2001. "Elasticities of Substitution in Real Business Cycle Models with Home Protection," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(4), pages 847-75, November.
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Other versions:
- Eric M. Leeper & Christopher A. Sims, 1994. "Toward a modern macroeconomic model usable for policy analysis," Working Paper 94-5, Federal Reserve Bank of Atlanta.
Jang-Ting Guo & Kevin J. Lansing, 1994. "The welfare effects of tax simplification: a general-equilibrium analysis," Working Paper 9409, Federal Reserve Bank of Cleveland. [Downloadable!]

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