skip to content

Faculty of Economics

Journal Cover

Cantore, C. and Freund, L. B.

Workers, Capitalists, and the Government: Fiscal Policy and Income (Re)Distribution

Journal of Monetary Economics

Vol. 119 pp. 58-74 (2021)

Abstract: We propose a novel two-agent New Keynesian model to study the interaction of fiscal policy and household heterogeneity in a tractable environment. Workers can save in bonds subject to portfolio adjustment costs; firm ownership is concentrated among capitalists who do not supply labor. The model is consistent with micro data on empirical intertemporal marginal propensities to consume, and it avoids implausible profit income effects on labor supply. Relative to the traditional two-agent model, these features imply, respectively, a lower sensitivity of consumption to the composition of public financing; and smaller fiscal multipliers alongside pronounced redistributive effects.

Keywords: Fiscal policy, Heterogeneity, HANK, TANK

JEL Codes: E12, E21, E25, E32, E62

Author links: Lukas Freund  

Publisher's Link: https://doi.org/10.1016/j.jmoneco.2021.01.004



Cambridge Working Paper in Economics Version of Paper: Workers, Capitalists, and the Government: Fiscal Policy and Income (Re)Distribution, Cantore, C. and Freund, L. B., (2020)

Papers and Publications



Recent Publications


Huffman, D., Raymond, C. and Shvets, J. Persistent Overconfidence and Biased Memory: Evidence from Managers American Economic Review [2022]

Bhattacharya, D. The Empirical Content of Binary Choice Models Econometrica [2021]

Aidt, T. S. Review of Forging the Franchise: The Political Origins of the Women's Vote Journal of Economic Literature [2022]

Ascari, G. and Haber, T. Non-Linearities, State-Dependent Prices and the Transmission Mechanism of Monetary Policy The Economic Journal, forthcoming [2021]