Workers, capitalists, and the government: fiscal policy and income (re)distribution.
Published version
Peer-reviewed
Repository URI
Repository DOI
Change log
Authors
Cantore, Cristiano
Freund, Lukas B
Abstract
We propose a novel two-agent New Keynesian model to study the interaction of fiscal policy and household heterogeneity in a tractable environment. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model is consistent with micro data on empirical intertemporal marginal propensities to consume, and it avoids implausible profit income effects on labor supply. Relative to the traditional two-agent model, these features imply, respectively, a lower sensitivity of consumption to the composition of public financing; and smaller fiscal multipliers alongside pronounced redistributive effects.
Description
Keywords
Fiscal policy, HANK, Heterogeneity, TANK
Journal Title
J Monet Econ
Conference Name
Journal ISSN
0304-3932
1873-1295
1873-1295
Volume Title
119
Publisher
Elsevier BV
Publisher DOI
Sponsorship
Economic and Social Research Council (ES/R009295/1)
Freund acknowledges support from the Gates Cambridge Trust (BMGF OPP1144) and Studienförderwerk Klaus Murmann as well as the hospitality of Deutsche Bundesbank.