FISCAL POLICY AND THE COMPOSITION OF PRIVATE CONSUMPTION: SOME EVIDENCE FROM THE U.S. AND CANADA

Authors: MALLEY, JIM¹; MOLANA, HASSAN²

Source: International Economic Journal, Volume 16, Number 1, Number 1/Spring 2002 , pp. 139-158(20)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

This paper develops a generalised version of the life-cycle model in which consumers' preferences are defined over components of consumption and are affected by the level of public expenditure on goods and services. The model implies that the crowding out of private consumption could in fact be a direct demand side phenomenon caused by the way preferences respond to a change in public spending. Evidence from U.S. and Canadian data for the period 1935–1995 confirms this theoretical conjecture as well as implying that in both countries demand for durable goods is likely to show relatively large swings which may undermine the stability of the sector and harm the supply side. [E22, E62]

Document Type: Research article

DOI: http://dx.doi.org/10.1080/10168730200080008

Affiliations: 1: University of Glasgow 2: University of Dundee

Publication date: 2002-03-01