The Limitations of Using Fiscal Incentives for Employment Promotion

Montek S. Ahluwalia

Chapter 17 in Employment Policy in a Developing Country A Case-study of India Volume 1, 1983, pp 341-359 from Palgrave Macmillan

Abstract: Abstract The role of fiscal incentives for employment promotion is only one aspect of the broader role of fiscal policy in this area. Fiscal policy can affect employment through three distinct mechanisms. The first is through its effect upon macroeconomic aggregates. Fiscal policy can stimulate aggregate demand, and therefore employment, in the short run provided there is some utilisable excess capacity. It can also promote higher rates of investment thus raising the level of capacity in the economy, and therefore employment, in the longer run. The second mechanism relates to Government expenditure decisions which can directly influence employment generation either by altering the composition of expenditure in favour of categories which are inherently more labour-using, or by choosing more labour-intensive techniques within given types of expenditure where such choices exist. Finally, fiscal policy can affect the level of employment either by altering relative output prices to induce consumers to switch to more labour-intensive products or by altering relative factor prices to induce producers to shift to more labour-using techniques. This is the mechanism of fiscal incentives with which this paper is concerned. The first two mechanisms are extremely important in terms of their quantitative impact on the employment situation. They may often be more important than fiscal incentives. However, they are outside the scope of this paper and are not dealt with further.

Keywords: Interest Rate; Fiscal Policy; Total Employment; Shadow Prex; Employment Creation (search for similar items in EconPapers)
Date: 1983
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-06267-6_18

Ordering information: This item can be ordered from
http://www.palgrave.com/9781349062676

DOI: 10.1007/978-1-349-06267-6_18

Access Statistics for this chapter

More chapters in International Economic Association Series from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().