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Journal Articles Journal of Money, Credit and Banking Year : 2009

Nonseparable Preferences, Fiscal Policy Puzzles, and Inferior Goods

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Abstract

Nonseparable preferences over consumption and leisure can generate an increase in private consumption in response to government spending, as found in the data, in a frictionless business cycle model. However, the conditions on preferences required for these result to obtain hold if and only if the consumption good is inferior. Similarly, positive co-movement of consumption and hours worked occurs if and only if either consumption or leisure is inferior.

Dates and versions

hal-00622869 , version 1 (12-09-2011)

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Florin Bilbiie. Nonseparable Preferences, Fiscal Policy Puzzles, and Inferior Goods. Journal of Money, Credit and Banking, 2009, 41 (2-3), pp.443-450. ⟨10.1111/j.1538-4616.2009.00213.x⟩. ⟨hal-00622869⟩
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