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Contractionary Effects Of Government Spending And Wartime Britain

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  • Watanabe, Shingo

Abstract

In dynamic general equilibrium models, private output is increased by government spending for goods and services, but decreased by government spending for employment. This paper presents the first evidence for the latter effect by studying the pre-WWII British wartime economy. Britain participated in numerous wars, increasing military employment greatly. British tax-smoothing policy and rare wartime governmental interventions reduce the difficulty of studying the effects of wartime government spending. This paper finds wartime decreases in industrial production, which can be explained by wartime government spending for military employment.

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  • Watanabe, Shingo, 2016. "Contractionary Effects Of Government Spending And Wartime Britain," Macroeconomic Dynamics, Cambridge University Press, vol. 20(4), pages 857-883, June.
    • Handle: RePEc:cup:macdyn:v:20:y:2016:i:04:p:857-883_00
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    Cited by:

    1. Shingo Watanabe, 2019. "What Do British Historical Data Tell Us About Government Spending Multipliers?," Economic Inquiry, Western Economic Association International, vol. 57(2), pages 1141-1162, April.

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