Industry evidence on the effects of government spending
This paper investigates industry-level effects of government purchases in order to shed light on the transmission mechanism for government spending on the aggregate economy. We begin by highlighting the different theoretical predictions concerning the effects of government spending on industry labor market equilibrium. We then create a panel data set that matches output and labor variables to shifts in industry-specific government demand. The empirical results indicate that increases in government demand raise output and hours, but lower real product wages and productivity. Markups do not change as a result of government demand increases. The results are consistent with the neoclassical model of government spending, but they are not consistent with the New Keynesian model of the effects of government spending.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html|
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.:
- Ian Domowitz & R. Glenn Hubbard & Bruce C. Petersen, 1986. "Business Cycles and the Relationship Between Concentration and Price-Cost Margins," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 1-17, Spring.
- Devereux, Michael B & Head, Allen C & Lapham, Beverly J, 1996. "Monopolistic Competition, Increasing Returns, and the Effects of Government Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 233-54, May.
- Yongsung Chang & Jay H. Hong, 2006.
"Do Technological Improvements in the Manufacturing Sector Raise or Lower Employment?,"
American Economic Review,
American Economic Association, vol. 96(1), pages 352-368, March.
- Yongsung Chang & Jay H. Hong, 2005. "Do technological improvements in the manufacturing sector raise or lower employment?," Working Papers 05-5, Federal Reserve Bank of Philadelphia.
- Yongsung Chang & Jay H. Hong, 2005. "Do technological improvements in the manufacturing sector raise or lower employment?," Working Paper 05-02, Federal Reserve Bank of Richmond.
- repec:oup:qjecon:v:111:y:1996:i:3:p:719-51 is not listed on IDEAS
- Susanto Basu & John G. Fernald, 1996.
"Returns to scale in U.S. production: estimates and implications,"
International Finance Discussion Papers
546, Board of Governors of the Federal Reserve System (U.S.).
- Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
- Patrick Kline, 2008.
"Understanding Sectoral Labor Market Dynamics: An Equilibrium Analysis of the Oil and Gas Field Services Industry,"
Cowles Foundation Discussion Papers
1645, Cowles Foundation for Research in Economics, Yale University.
- Kline, Patrick, 2008. "Understanding Sectoral Labor Market Dynamics: An Equilibrium Analysis of the Oil and Gas Field Services Industry," Working Papers 43, Yale University, Department of Economics.
- Burnside, Craig & Eichenbaum, Martin & Fisher, Jonas D. M., 2004.
"Fiscal shocks and their consequences,"
Journal of Economic Theory,
Elsevier, vol. 115(1), pages 89-117, March.
- repec:oup:qjecon:v:108:y:1993:i:1:p:1-32 is not listed on IDEAS
- Christopher J. Nekarda & Valerie A. Ramey, 2013. "The Cyclical Behavior of the Price-Cost Markup," NBER Working Papers 19099, National Bureau of Economic Research, Inc.
- Barro, Robert J, 1981.
"Output Effects of Government Purchases,"
Journal of Political Economy,
University of Chicago Press, vol. 89(6), pages 1086-1121, December.
- Min Ouyang, 2011. "On the Cyclicality of R&D," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 542-553, May.
- Evi Pappa, 2005. "New Keynesian or RBC Transmission? The Effects of Fiscal Policy in Labor Markets," Working Papers 293, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
This item is featured on the following reading lists or Wikipedia pages:
- Industry Evidence on the Effects of Government Spending (AEJ:MA 2011) in ReplicationWiki
When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2010-28. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs)
If references are entirely missing, you can add them using this form.