The Distributional Effects of Fiscal Policy on Consumption and Employment in Nigeria: A Bayesian DSGE Approach

Abstract

This study investigates the distributional effects of fiscal policy on consumption and employment in Nigeria using a Bayesian DSGE approach for the period 1981-2017. The empirical results show that government spending has higher positive effects on the employment and consequently the consumption of poor households. Also, government transfers have higher positive effects on the consumption of poor households. The study also shows that public investment has higher positive effects on the employment of poor households, but higher positive effects on the consumption of rich households. Consumption tax, capital tax and labor tax have higher effects on the consumption of the rich than of the poor households, but almost equal effects on the employment of both households.