Time-Varying Employment Risks, Consumption Composition, and Fiscal Policy

Kazufumi Yamana, Makoto Nirei and Sanjib Sarker ()
Additional contact information
Sanjib Sarker: Utah State University

Economics Bulletin, 2016, vol. 36, issue 2, 802-812

Abstract: This study examines the response of aggregate consumption to active labor market policies that reduce unemployment. We develop a dynamic general equilibrium model with heterogeneous agents and uninsurable unemployment as well as policy regime shocks to quantify the consumption effects of policy. By implementing numerical experiments using the model, we demonstrate a positive effect on aggregate consumption even when the policy serves as a pure transfer from the employed to the unemployed. The positive effect on consumption results from the reduced precautionary savings of the households who indirectly benefit from the policy by a decreased unemployment hazard in future.

Keywords: Time-varying idiosyncratic risk; unemployment risk; precautionary saving; regime- switching fiscal policy; transfers (search for similar items in EconPapers)
JEL-codes: E2 H5 (search for similar items in EconPapers)
Date: 2016-04-29
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I2-P79.pdf (application/pdf)

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:ebl:ecbull:eb-15-00712

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().