Government Spending and Durable Goods

Arbeitspapier

This paper shows that the fiscal multiplier for purchases of durable and investment goods is very small - much smaller than the multiplier for nondurable goods. Standard models predict small durables multipliers because private sector purchases of durable goods are highly intertemporally substitutable and therefore easily crowded out. Empirical estimates based on U.S. data confirm this result. In aggregate time series data output rises by about 50 cents less if the government purchases 1$ of durable rather than nondurable goods. At the industry level, spending on durable goods leads to smaller sectoral expansions than spending on nondurable goods. The findings of this paper suggest that infrastructure spending which is frequently part of fiscal stimulus packages is relatively ineffective at raising aggregate demand.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 6244

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Business Fluctuations; Cycles ; Fiscal Policy ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
• Subject: durable goods ; fiscal policy ; government spending ; fiscal multiplier

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boehm, Christoph E.
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/149331
• Last update: 10.03.2025, 11:45 AM CET