Public investment and labor market flexibility

Chun-Hung Kuo () and Hiroaki Miyamoto
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Chun-Hung Kuo: National Tsing Hua University

Economics Bulletin, 2023, vol. 43, issue 2, 1122 - 1132

Abstract: This paper examines how labor market flexibility affects the output effect of a public investment shock by using panel data from OECD countries. We identify the public investment shock as a public investment spending forecast error and employ the local projection method to estimate its effect on output. Our empirical analysis shows that labor market flexibility affects the output effect of the public investment shock. While a positive public investment shock boosts output significantly in economies with flexible labor markets, output responses are not statistically significant in economies with rigid labor markets.

Keywords: Public investment; fiscal multipliers; labor market flexibility (search for similar items in EconPapers)
JEL-codes: E6 H3 (search for similar items in EconPapers)
Date: 2023-06-30
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Public Investment and Labor Market Flexibility (2020)
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