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We empirically revisit the crowding-in effect of government spending on private consumption based on rolling windows of U.S. data. Results show that in earlier samples government spending is increasingly crowding in private consumption; however, this relation is reverted in the latest periods. We propose a model embedding non-separable public and private consumption in the utility function and rule-of-thumb consumers to assess the sources of non-monotonic changes in the transmission of the shock. The iterative full information estimation of the model reveals that changes in the co-movement between private and public spending is primarily driven by the fluctuations in the elasticity of substitution between private and public consumption, the share of financially constrained consumers, and the elasticity of intertemporal substitution.

Monetary policy. --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Monetary policy --- E-books --- Labor --- Macroeconomics --- Public Finance --- National Government Expenditures and Related Policies: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Wages, Compensation, and Labor Costs: General --- Price Level --- Inflation --- Deflation --- Public finance & taxation --- Labour --- income economics --- Expenditure --- Private consumption --- Consumption --- Real wages --- Sticky prices --- National accounts --- Prices --- Expenditures, Public --- Economics --- Wages --- United States --- Income economics

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A distinctive feature of market-provided services is that some of them have close substitutes at home. Households may therefore switch between consuming home and market services in response to changes in the real wage - the opportunity cost of working at home - and changes in the price of market services. In order to analyze and quantify the implications of this trade-off for monetary policy, I embed a household sector into an otherwise standard sticky price DSGE model, which I calibrate to the U.S. economy. The results of the model are twofold. At the sectoral level, household production augments the service sector's New Keynesian Phillips curve with a sizable extra component that co-moves negatively with the output gap term, lowering the incentive of service sector firms to change their prices. This mechanism endogenously amplifies the real effects of a monetary shock in that sector, unlike in the nondurable goods sector for which households cannot manufacture substitutes at home. At the aggregate level, household production also implies more sluggish prices and a stronger response of real macroeconomic variables to a monetary shock. Some empirical support for this theory is provided.

Business & Economics --- Industries --- Service industries --- Monetary policy. --- Management. --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Industrial management --- Households --- Monetary policy --- Economic aspects&delete& --- Econometric models --- E-books --- Population --- Families --- Home economics --- Economic aspects --- Macroeconomics --- Industries: Service --- Production and Operations Management --- General Aggregative Models: Keynes --- Keynesian --- Post-Keynesian --- Business Fluctuations --- Cycles --- Household Production and Intrahousehold Allocation --- Industry Studies: Services: General --- Labor Economics: General --- Price Level --- Inflation --- Deflation --- Macroeconomics: Production --- Macroeconomics: Consumption --- Saving --- Wealth --- Labour --- income economics --- Services sector --- Labor --- Sticky prices --- Output gap --- Consumption --- Economic sectors --- Prices --- National accounts --- Production --- Labor economics --- Economic theory --- Economics --- United States --- Income economics

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The paper asks how state of the art DSGE models that account for the conditional response of hours following a positive neutral technology shock compare in a marginal likelihood race. To that end we construct and estimate several competing small-scale DSGE models that extend the standard real business cycle model. In particular, we identify from the literature six different hypotheses that generate the empirically observed decline in worked hours after a positive technology shock. These models alternatively exhibit (i) sticky prices; (ii) firm entry and exit with time to build; (iii) habit in consumption and costly adjustment of investment; (iv) persistence in the permanent technology shocks; (v) labor market friction with procyclical hiring costs; and (vi) Leontief production function with labor-saving technology shocks. In terms of model posterior probabilities, impulse responses, and autocorrelations, the model favored is the one that exhibits habit formation in consumption and investment adjustment costs. A robustness test shows that the sticky price model becomes as competitive as the habit formation and costly adjustment of investment model when sticky wages are included.

Business & Economics --- Labor & Workers' Economics --- Labor supply --- Hours of labor --- Effect of technological innovations on --- Mathematical models. --- Econometric models. --- Alternative work schedules --- Children --- Labor, Hours of --- Work hours --- Work schedules --- Working-day --- Working hours --- Labor force --- Labor force participation --- Labor pool --- Work force --- Workforce --- Work --- Labor productivity --- Labor time --- Timekeeping --- Weekly rest-day --- Labor market --- Human capital --- Labor mobility --- Manpower --- Manpower policy --- Prices --- Business cycles --- Econometric models --- E-books --- Econometrics --- Labor --- Macroeconomics --- Innovation --- Research and Development --- Technological Change --- Intellectual Property Rights: General --- Labor Economics: General --- Wages, Compensation, and Labor Costs: General --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- Price Level --- Inflation --- Deflation --- Labour --- income economics --- Technology --- general issues --- Econometrics & economic statistics --- Real wages --- Structural vector autoregression --- Sticky prices --- Econometric analysis --- Labor economics --- Wages --- United States --- General issues --- Income economics