Journal of Political Economy Vol. 132 No. 10 2024

Big G

Lydia Cox^1,2,3,4,5,6; Gernot J. Müller^1,2,3,4,5,6; Ernesto Pastén^1,2,3,4,5,6; Raphael Schoenle^1,2,3,4,5,6; Michael Weber^1,2,3,4,5,6

¹ National Bureau of Economic Research · ² Economic Policy Institute · ³ University of Wisconsin–Madison · ⁴ Banco Central de Chile · ⁵ Brandeis University · ⁶ University of Tübingen

Abstract

“Big G” typically refers to aggregate government spending on a homogeneous good. We confront this notion with five facts for the universe of federal purchases. First, they are volatile and account for the largest part of the short-run variation in total spending. Second, the origin of their variation is granular. Third, purchases are subject to procurement and bidding. Fourth, they are concentrated in long-term contracts. Fifth, their composition is biased toward sectors in which private sector prices are sticky. We develop a two-sector New Keynesian model consistent with these facts and find where the government spends is key for aggregate effects.

DOI

10.1086/730426

Volume

132

Issue

10

Pages

3260-3297

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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