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Costly Capital Reallocation and the Effects of Government Spending
Open accessAbstract
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.
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Cited by
What are the effects of fiscal policy shocks?
Mountford, A., & Uhlig, H. (2009) · Journal of Applied Econometrics · doi:10.1002/jae.1079 · Cited by 1,349
The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks
Romer, C., & Romer, D. (2007) · National Bureau of Economic Research · doi:10.3386/w13264 · Cited by 380
Estimating Local Fiscal Multipliers
Suárez Serrato, J. C., & Wingender, P. (2016) · doi:10.3386/w22425 · Cited by 270
Metadata
- Authors
- Ramey, V., & Shapiro, M.
- Venue
- National Bureau of Economic Research
- Publisher
- National Bureau of Economic Research
- Published
- 1999-04
- OpenAlex
- W2129197001
- Cited by
- 320
- References
- 0
- Type
- report
- Language
- en
- Open access
- green
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- Ramey, V., & Shapiro, M. (1999). Costly Capital Reallocation and the Effects of Government Spending. National Bureau of Economic Research. https://doi.org/10.3386/w6283
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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