Industry Evidence on the Effects of Government Spending / Christopher J. Nekarda, Valerie A. Ramey.

Format:

Book

Author/Creator:

Nekarda, Christopher J.

Contributor:

National Bureau of Economic Research.

Ramey, Valerie A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15754.

NBER working paper series no. w15754

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

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.

Notes:

Print version record

February 2010.