Big G

“Big G” typically refers to aggregate government spending on a homogeneous good. We confront this notion with five facts for the universe of federal purchases. First, they are volatile and account for the largest part of the short-run variation in total spending. Second, the origin of their variatio...

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Bibliographic Details
Published in:The Journal of political economy 2024-10, Vol.132 (10), p.3260-3297
Main Authors: Cox, Lydia, Müller, Gernot J., Pastén, Ernesto, Schoenle, Raphael, Weber, Michael
Format: Article
Language:English
Subjects:
Government spending
Prices
Private sector
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Summary:“Big G” typically refers to aggregate government spending on a homogeneous good. We confront this notion with five facts for the universe of federal purchases. First, they are volatile and account for the largest part of the short-run variation in total spending. Second, the origin of their variation is granular. Third, purchases are subject to procurement and bidding. Fourth, they are concentrated in long-term contracts. Fifth, their composition is biased toward sectors in which private sector prices are sticky. We develop a two-sector New Keynesian model consistent with these facts and find where the government spends is key for aggregate effects.
ISSN:0022-3808
1537-534X
DOI:10.1086/730426