Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/296854 
Year of Publication: 
2023
Series/Report no.: 
ISER Discussion Paper No. 1211
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
It has been empirically observed that consumption responds positively to government spending shock, however, existing models with intertemporally-optimizing households do not easily reconcile this stylized fact. This paper aims to address this discrepancy between models and data, focusing on the non-separable preferences with respect to consumption, leisure, and government spending. We derive conditions for a positive consumption multiplier under the general utility function and find that consumption can respond positively when leisure and government spending are substitutes. Examples of government spending that would have such an effect include care for children and the elderly, education spending, highway and public transportation.
Subjects: 
Fiscal multiplier
Non-separable preferences
Substitutability
JEL: 
E62
E32
E60
Document Type: 
Working Paper

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