THE EFFECTS OF FISCAL SHOCKS ON EMPLOYMENT AND THE REAL WAGE

Evi Paraskevi Pappa ()

International Economic Review, 2009, vol. 50, issue 1, pages 217-244

Abstract: We study the transmission of fiscal shocks in the labor market. We employ a structural VAR and base identification on the restrictions that shocks to government consumption, investment, and employment must raise output and deficits. These restrictions hold in both prototype Real Business Cycle (RBC) and New Keynesian models. Shocks to government consumption and investment increase real wages and employment contemporaneously, both at state level and in the aggregate. The dynamics in response to employment shocks are mixed: Increases in government employment raise the real wage and total employment in the aggregate. However, in one third of the states they reduce total employment. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 2009

Downloads: (external link)
http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2008.00528.x link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ier:iecrev:v:50:y:2009:i:1:p:217-244

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is edited by Kenneth I. Wolpin

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association
Address: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297
Contact information at EDIRC.
Series data maintained by ().