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The changing structure of goverment consumption spending

Author

Listed:
  • Alessio Moro

    (University of Cagliari)

  • Omar Rachedi

    (Banco de España)

Abstract

We document a secular increase in the share of purchases from the private sector in government consumption spending: over time the government purchases relatively more private-sector goods, and relies less on its own production of value added. We build a general equilibrium model in which investment-specifi c technological change accounts for the changing structure of government spending. The model predicts that this secular process alters the transmission of government spending shocks by raising the response of private value added, while dampening the response of hours. We validate these results with novel empirical evidence on the effects of government spending across countries.

Suggested Citation

  • Alessio Moro & Omar Rachedi, 2018. "The changing structure of goverment consumption spending," Working Papers 1840, Banco de España.
  • Handle: RePEc:bde:wpaper:1840
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    References listed on IDEAS

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    Cited by:

    1. Sen, Ali, 2020. "Structural change within the services sector, Baumol's cost disease, and cross-country productivity differences," MPRA Paper 99614, University Library of Munich, Germany.
    2. Omar Rachedi, 2020. "Structural transformation in the Spanish economy," Occasional Papers 2003, Banco de España.

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    More about this item

    Keywords

    government gross output; government wage bill; fi scal multiplier;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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