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Targeted Transfers and the Fiscal Response to the Great Recession

Hyunseung Oh; Ricardo Reis

Title:
Targeted Transfers and the Fiscal Response to the Great Recession
Author(s):
Oh, Hyunseung
Reis, Ricardo
Date:
Type:
Reports
Department(s):
Economics
Persistent URL:
Series:
Department of Economics Discussion Papers
Part Number:
1011-10
Publisher:
Department of Economics, Columbia University
Publisher Location:
New York
Abstract:
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.
Subject(s):
Economics
Item views
1586
Metadata:
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Suggested Citation:
Hyunseung Oh, Ricardo Reis, , Targeted Transfers and the Fiscal Response to the Great Recession, Columbia University Academic Commons, .

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