TY  - JOUR
AU  - Oh, Hyunseung
AU  - Reis, Ricardo
TI  - Targeted Transfers and the Fiscal Response to the Great Recession
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16775
PY  - 2011
Y2  - February 2011
DO  - 10.3386/w16775
UR  - http://www.nber.org/papers/w16775
L1  - http://www.nber.org/papers/w16775.pdf
N1  - Author contact info:
Hyunseung Oh
Federal Reserve Board
20th St and Constitution Ave NW
Washington, DC 20551
E-Mail: hyunseungoh@gmail.com

Ricardo Reis
Department of Economics
London School of Economics
Houghton Street
London WC1 2AE
United Kingdom
Tel: +44-20-7955-7508
E-Mail: r.a.reis@lse.ac.uk
AB  - Between 2007 and 2009, government expenditures increased rapidly across the OECD countries.  While economic research on the impact of government purchases has flourished, in the data, about three quarters of the increase in expenditures in the United States (and more in other countries) was in government transfers.  We document this fact, and show that the increase in U.S. spending on retirement, disability, and medical care has been as high as the increase in government purchases.  We argue that future research should focus on the positive impact of transfers.  Towards this, we present a model in which there is no representative agent and Ricardian equivalence does not hold because of uncertainty, imperfect credit markets, and nominal rigidities.  Targeted lump-sum transfers are expansionary both because of a neoclassical wealth effect and because of a Keynesian aggregate demand effect.
ER  -