Series: Working Papers. 1831.
Author: Javier Andrés, José E. Boscá, Javier Ferri and Cristina Fuentes-Albero.
Full document
Abstract
Using households’ balance sheet composition in the Panel Survey of Income Dynamics, we
identify six household types. Since 1999, there has been a decline in the share of patient
households and an increase in the share of impatient households with negative wealth.
Using a six-agent New Keynesian model with search and matching frictions, we explore how
changes in households’ shares affect the transmission of government spending shocks. We
show that the relative share of households in the left tail of the wealth distribution plays a key
role in the aggregate marginal propensity to consume, the magnitude of fiscal multipliers,
and the distributional consequences of government spending shocks. While the output
and consumption multipliers are positively correlated with the share of households with
negative wealth, the size of the employment multiplier is negatively correlated. Moreover,
our calibrated model delivers jobless fiscal expansions.