Costly Capital Reallocation and the Effects of Government Spending / Valerie A. Ramey, Matthew D. Shapiro.

Format:

Book

Author/Creator:

Ramey, Valerie A.

Contributor:

National Bureau of Economic Research.

Shapiro, Matthew D.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6283.

NBER working paper series no. w6283

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

Changes in government spending often lead to significant shifts in demand across sectors. This paper analyzes the effects of sector-specific changes in government spending in a two-sector dynamic general equilibrium model in which the reallocation of capital across sectors is costly. The two-sector model leads to a richer array of possible responses of aggregate variables than the one-sector model. The empirical part of the paper estimates the effects of military buildups on a variety of macroeconomic variables using a new measure of military shocks. The behavior of macroeconomic aggregates is consistent with the predictions of a multi-sector neoclassical model. In particular, consumption, real product wages and manufacturing productivity fall in response to exogenous military buildups in the post-World War II United States.

Notes:

Print version record

April 1999.