Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297394 
Authors: 
Year of Publication: 
2023
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2023-9
Publisher: 
Bank of Canada, Ottawa
Abstract: 
Using micro data from the U.S. Consumer Expenditure Survey and Current Population Survey, I document that government spending shocks affect individuals differently over the life cycle. Young households increase their consumption after an expansionary shock while prime-age households reduce it, regardless of their level of income or debt. Productivity and wages increase significantly for young workers. To rationalize these findings, I develop a parsimonious New Keynesian life-cycle model where young agents accumulate skills on the job through a learning-by-doing process. An increase in government spending raises hours worked, which enhances skill accumulation, particularly among young workers who face a steep learning curve. The ensuing increase in the relative labor demand for young workers boosts their wages, thus stimulating their consumption.
Subjects: 
Business fluctuations and cycles
Fiscal policy
Productivity
JEL: 
D12
D15
E21
E62
J11
J24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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