Big G
Michael Weber, Associate Professor of Finance
This project aims to understand the anatomy of Big G. In the national accounts G refers to “government spending”—the part of GDP that comprises government expenditures. This convention possibly helps explain why research on fiscal policy typically entertains a some-what crude notion of government spending as a homogeneous good, isomorphic to GDP. In empirical and theoretical work, we frequently refer to it as Big G, and the literature assumes policy makers can freely adjust it over time—in response to the business cycle, or for other reasons. In this project, we plan to download all government contracts awarded by all government agency between the early 2000s and today. We plan to study several stylized facts regarding the properties of government spending: (i) the granularity of spending; (ii) the sectoral composition and bias relative to consumer spending; (iii) the duration of government spending; (iv) the relevance of idiosyncratic versus aggregate shocks driving the spending; and (v) the stickiness of government contracts relative to private-sector expenditures. We then plan to study the relevance of these properties at the micro level for the fiscal transmission mechanism in the aggregate.