Targeted Transfers and the Fiscal Response to the Great Recession / Hyunseung Oh, Ricardo Reis.

Format:

Book

Author/Creator:

Oh, Hyunseung.

Contributor:

National Bureau of Economic Research.

Reis, Ricardo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16775.

NBER working paper series no. w16775

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2011.

Summary:

Between 2007 and 2009, government expenditures increased rapidly across the OECD countries. While economic research on the impact of government purchases has flourished, in the data, about three quarters of the increase in expenditures in the United States (and more in other countries) was in government transfers. We document this fact, and show that the increase in U.S. spending on retirement, disability, and medical care has been as high as the increase in government purchases. We argue that future research should focus on the positive impact of transfers. Towards this, we present a model in which there is no representative agent and Ricardian equivalence does not hold because of uncertainty, imperfect credit markets, and nominal rigidities. Targeted lump-sum transfers are expansionary both because of a neoclassical wealth effect and because of a Keynesian aggregate demand effect.

Notes:

Print version record

February 2011.