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The Structure of Government Spending and the Business Cycle
Social Science Research Network
We explore the role of the composition of government spending for the cyclical properties of fiscal variables and for the volatility of the business cycles. In the U.S., the fraction of mandatory spending in total government outlays increased from around 0.40 to 0.60 during the last 50 years, while the share of total government outlays in national output stayed relatively constant during this period. We distinguish mandatory and discretionary public spending in a standard model of optimaldoi:10.2139/ssrn.2752094 fatcat:efbjt33h6ncljpf2a5jpk2yuiq