42 Pages Posted: 28 Apr 2020 Last revised: 15 May 2021
Date Written: April 2020
Big G typically refers to aggregate government spending on a homogeneous good. In this paper, we open up this construct by analyzing the entire universe of procurement contracts of the US government and establish five facts. First, government spending is granular, that is, it is concentrated in relatively few firms and sectors. Second, relative to private expenditures its composition is biased. Third, procurement contracts are short-lived. Fourth, idiosyncratic variation dominates the fluctuation of spending. Last, government spending is concentrated in sectors with relatively sticky prices. Accounting for these facts within a stylized New Keynesian model offers new insights into the fiscal transmission mechanism: fiscal shocks hardly impact inflation, little crowding out of private expenditure exists, and the multiplier tends to be larger compared to a one-sector benchmark aligning the model with the empirical evidence.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
This is a National Bureau of Economic Research Paper. NBER charges a fee of $5.00 for this paper.
File name: nber.pdf
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.