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Do Government Purchases Affect Unemployment?

Steinar Holden () and Victoria Sparrman

Scandinavian Journal of Economics, 2018, vol. 120, issue 1, 124-158

Abstract: We estimate the effect of government purchases on unemployment in 20 OECD countries, for the period 1980–2007. An increase in government purchases, equal to 1 percent of GDP, is found to reduce unemployment by about 0.3 percentage points in the same year. The effect is greater and more persistent under less “employment‐friendly” labour‐market institutions, and it is greater and more persistent under a fixed exchange rate regime than under a floating regime. The effect is also greater in downturns than in booms. The effect on unemployment reflects a corresponding positive effect of increased government purchases on the employment‐to‐population rate.

Date: 2018
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Working Paper: Do Government Purchases Affect Unemployment? (2011) Downloads
Working Paper: Do Government Purchases Affect Unemployment? (2011) Downloads
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Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

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