Heterogeneous Spending, Heterogeneous Multipliers

IMF Working Papers, March 10, 2023

Source details

Core question: Do local fiscal multipliers depend on what the government purchases?
Summary finding: Government purchases of services have larger effects on employment than spending on goods.
Mechanism highlighted: Industries producing services are more labor-intensive than industries producing goods; this heterogeneity in labor intensity is an important mechanism behind the results.
Implication: Spending directed toward labor-intensive industries generates stronger increases in employment and labor income relative to spending toward non-labor-intensive industries.

Government purchases of services yield larger employment effects than government purchases of goods.
Industries producing services are more labor-intensive than industries producing goods.
Heterogeneity in labor intensity is an important mechanism driving heterogeneous local fiscal multipliers.
Spending targeted to labor-intensive industries produces stronger increases in employment and labor income than spending targeted to non-labor-intensive industries.

Subject: Defense spending, Employment, Expenditure, Fiscal multipliers, Fiscal policy, Labor
Keywords: copyright page, Defense spending, Employment, Fiscal multipliers, goods spending, government purchase, Heterogeneous Local Fiscal Multipliers, heterogeneous multiplier, Labor Intensity, Services and Goods Spending, services spending

Format noted: PDF (Download PDF)
Citation example provided: Umberto Muratori, Pedro Juarros, and Daniel Valderrama. "Heterogeneous Spending, Heterogeneous Multipliers", IMF Working Papers 2023, 052 (2023), accessed 9/16/2026, https://doi.org/10.5089/9798400233777.001

Source: Heterogeneous Spending, Heterogeneous Multipliers (IMF Working Paper No. 2023/052), March 10, 2023.