Government purchases over the business cycle
Subtitle: the role of economic and political inequality
By: Ruediger Bachmann, Jinhui Bai
Contributors: Bai, Jinhui; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16247; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16247.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "This paper explores the implications of economic and political inequality for the business cycle comovement of government purchases.  We set up and compute a heterogeneous-agent neoclassical growth model, where households value government purchases which are financed by income taxes.  A key feature of the model is a wealth bias in the political aggregation process.  When calibrated to U.S.  wealth inequality and exposed to aggregate productivity shocks, such a model is able to generate milder procyclicality of government purchases than models with no political wealth bias.  The degree of wealth bias that matches the observed mild procyclicality of government purchases in the data, is consistent with cross-sectional data on political participation"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 9/21/2010.

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