Housework and fiscal expansions Articles uri icon

publication date

  • May 2016

start page

  • 94

end page

  • 108

volume

  • 79

International Standard Serial Number (ISSN)

  • 0304-3932

Electronic International Standard Serial Number (EISSN)

  • 1873-1295

abstract

  • In an otherwise-standard business cycle model with housework, calibrated consistently with data on time use, we discipline complementarity between consumption and hours worked and relate its strength to the size of fiscal multipliers. Evidence on the substitutability between home and market goods confirms that complementarity is an empirically relevant driver of fiscal multipliers. However, in a housework model substantial complementarity can be generated without imposing a low wealth effect, which contradicts the microeconomic evidence. Also, explicitly modeling housework matters for assessing the welfare effects of government spending, which are understated by theories that neglect substitutability between home-produced and market goods.

subjects

  • Economics

keywords

  • government expenditure shocks; home production