THE INTERGENERATIONAL INCIDENCE OF GOVERNMENT SPENDING

This paper analyzes the effect of an increase in government spending o n the welfare of different generations in a dynamic general equilibriu m model. The paper shows that the intergenerational incidence of gover nment spending on a public good is determined not only by the welfare effects due to the public good and to financing the good but also by a welfare effect due to intertemporal substitution between private cons umption when government spending is increased. The degree of substitut ability between private consumption and public spending is shown to be a key determinant of this incidence.