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Title: Fiscal Multipliers and Phillips Curves with a Consumption Network

Citation Type: Miscellaneous

Publication Year: 2002

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Abstract: We show that households spend their marginal and their average dollar dif- ferently across sectors. Crucially, marginal expenditure is biased toward sectors employing high-MPC workers, revealing a new redistribution channel that ben- efits high-MPC households during expansions. We build a Multi-Sector, Two- Agent, New Keynesian model with non-homothetic preferences consistent with these findings. The new redistribution channel increases the fiscal multiplier by 10pp compared to an equivalent homothetic economy. The model also predicts steeper Phillips curves in sectors with high-MPC workers, a result we validate empirically with a novel identification strategy. The implied sectoral wage dy- namics strengthen the redistribution towards high-MPC households and raise the inflationary impact of the shock by over 70 percent.

Url: https://francberaldi.github.io/MyPapers/BM2024_ConsumptionNetwork.pdf

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Authors: Beraldi, Francesco; Malgieri, Cedomir

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Data Collections: IPUMS CPS

Topics: Poverty and Welfare

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