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Using household level data for the U.S. from the Consumer Expenditure Survey, I document that age is a key driver of consumption adjustment to government spending shocks. Responses of young households are significantly higher, regardless of their income level or debt position. Further evidence using micro data from the Current Population Survey reveals greater responsiveness of productivity, wages and hours worked to government spending shocks among young workers. I propose a new transmission channel of fiscal policy that can account for these heterogeneous effects across age groups, based on differences in skill accumulation over the life-cycle. To illustrate the mechanism, I develop a parsimonious New Keynesian life-cycle model where young agents accumulate skills on-the-job through a learning by-doing process. As individuals work more following a fiscal stimulus, the young raise their productivity faster than their prime-age counterparts. The ensuing increase in the relative labor demand for young workers boosts their wages, stimulating their consumption.
