Fiscal Expansions, Unemployment, and Labor Force Participation: Theory and evidence
International Economic Review, 2012, 53, 4, 1205–1228
BRÜCKNER, Markus, PAPPA, Evi, Fiscal Expansions, Unemployment, and Labor Force Participation: Theory and evidence, International Economic Review, 2012, 53, 4, 1205–1228 - https://hdl.handle.net/1814/25617
Retrieved from Cadmus, EUI Research Repository
Structural VARs indicate that for many OECD countries labor force participation, employment, and the unemployment rate significantly increase following increases in government expenditures under a variety of specifications and identification schemes. Fiscal expansions also tend to increase real wages. Existing models have difficulties in generating such responses. We show that the empirical regularities can be reproduced with two additions into a standard New Keynesian model with matching frictions: (a) a labor force participation choice and (b) workers’ heterogeneity.
Article first published online: 9 OCT 2012
Cadmus permanent link: https://hdl.handle.net/1814/25617
Full-text via DOI: 10.1111/j.1468-2354.2012.00717.x
ISSN: 0020-6598; 1468-2354
Publisher: Economics Dept. of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
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