How quickly the economy recovers after an economic shock also depends on the behavior of private households. Using a complex theoretical model, economist Prof. Dr. Christian Bayer from the University of Bonn and his team demonstrated that growing income uncertainty among private households can lead to an economic downturn. The model can also be used to identify the government’s options for action and calculate their consequences for the economy: Government investments can stabilize the economy in a similar way to interest rate cuts, but with more favorable distributional effects. The study has now been published in the journal “Econometrica”.