We document a secular change in the structure of government consumption spending: over time the government purchases relatively more private-sector goods, and relies less on its own production of value added. This process alters the transmission of government spending shocks, as the response of hours decreases – whereas the response of output remains constant – when government spending is more intensive in private-sector goods. We rationalize these facts with a general equilibrium model where the slowdown of public-sector relative productivity drives both the changing structure of government spending and the disconnect between the responses of hours and output to government spending shocks.
|Titolo:||The changing structure of goverment consumption spending|
|Data di pubblicazione:||2018|