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Sectoral intermediate goods and redistributive effects of economic policies

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  • Nalban, Valeriu

Abstract

We study the redistributive effects of monetary and fiscal policies in a limited-heterogeneity model. It features two types of households and two types of intermediate firms, with savers being employed exclusively by capital-intensive producers and spenders by labor-intensive producers. Following a monetary or a fiscal expansion, consumption inequality decreases temporary: policy shocks generate higher benefits for hand-to-mouth households through increases in their labor income, outweighing the direct savings–consumption substitution effects for the optimizing households. The reduction in consumption inequality is higher the more complementary sectoral intermediate goods are, that is when a more balanced composition of the two sectoral goods is required for final good production. As compared to a single-firm model, in our two-firm, two-household model the effects on relative consumption are attenuated; this suggests a potential overestimation of redistributive effects in homogeneous-firm models.

Suggested Citation

  • Nalban, Valeriu, 2018. "Sectoral intermediate goods and redistributive effects of economic policies," Journal of Macroeconomics, Elsevier, vol. 58(C), pages 292-307.
    • Handle: RePEc:eee:jmacro:v:58:y:2018:i:c:p:292-307
    DOI: 10.1016/j.jmacro.2018.10.003
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    More about this item

    Keywords

    Heterogeneity; Consumption inequality; General equilibrium; Monetary policy; Fiscal policy;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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