Transfer Payments and the Macroeconomy: The Effects of Social Security Benefit Increases, 1952–1991

Christina Romer · David Romer

42 citations0/0 files storedAmerican Economic Journal Macroeconomics

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Monetary Policy and Economic Impact Economic and Fiscal Studies Fiscal Policy and Economic Growth

Abstract

This paper uses Social Security benefit increases from 1952 to 1991 to investigate the macroeconomic effects of changes in transfers. It finds a large, immediate, and significant positive response of consumption to permanent benefit increases. The response declines after about five months, and does not appear to spread to industrial production or employment. The effects of transfers are faster, but much less persistent and much smaller overall, than those of tax changes. Finally, monetary policy responds strongly to benefit increases but not to tax changes. This may account for the failure of the effects of transfers to persist or spread. (JEL E21, E62, E63, H31, H55)

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References

2005Estimation and Inference of Impulse Responses by Local Projections 2002An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output 2010The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks 1999An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output 2011When Is the Government Spending Multiplier Large?2011Identifying Government Spending Shocks: It's all in the Timing*2014Fiscal Stimulus in a Monetary Union: Evidence from US Regions 2011Simple Analytics of the Government Expenditure Multiplier

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