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Nonseparable Preferences, Fiscal Policy Puzzles, and Inferior Goods

Author

Listed:
  • Florin Bilbiie

    () (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, PSE - Paris School of Economics)

Abstract

Nonseparable preferences over consumption and leisure can generate an increase in private consumption in response to government spending, as found in the data, in a frictionless business cycle model. However, the conditions on preferences required for these result to obtain hold if and only if the consumption good is inferior. Similarly, positive co-movement of consumption and hours worked occurs if and only if either consumption or leisure is inferior.

Suggested Citation

  • Florin Bilbiie, 2009. "Nonseparable Preferences, Fiscal Policy Puzzles, and Inferior Goods," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00622869, HAL.
  • Handle: RePEc:hal:cesptp:hal-00622869
    DOI: 10.1111/j.1538-4616.2009.00213.x
    Note: View the original document on HAL open archive server: https://hal-paris1.archives-ouvertes.fr/hal-00622869
    as

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