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Fiscal Policy and Occupational Employment Dynamics

Christian Bredemeier (), Falko Juessen () and Roland Winkler ()
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Christian Bredemeier: University of Cologne
Falko Juessen: University of Wuppertal

No 10466, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: We document substantial heterogeneity in occupational employment dynamics in response to government spending shocks. Employment rises most strongly in service, sales, and office ("pink-collar") occupations. By contrast, employment in blue-collar occupations is hardly affected by fiscal stimulus which is striking in light of its strong exposure to the cycle and its long-run decline due to technical change and globalization. We provide evidence that occupation-specific changes in labor demand are key to understand these findings and develop a business-cycle model that explains the heterogeneous occupational employment dynamics as a consequence of differences in the short-run substitutability between labor and capital services across occupations.

Keywords: fiscal policy; composition of employment; occupations; industries; heterogeneity (search for similar items in EconPapers)
JEL-codes: E62 E24 J21 J23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lma and nep-mac
Date: 2017-01
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