Nonseparable Preferences, Fiscal Policy Puzzles, and Inferior Goods |
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Authors: | FLORIN O BILBIIE |
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Institution: | Florin O. Bilbiie;is an Assistant Professor, Department of Finance and Economics, HEC Paris Business School, France (E-mail: ). |
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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. |
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Keywords: | D11 E21 E62 H31 |
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