Fiscal stimulus and labor market policies in Europe

Ester Faia, Wolfgang Lechthaler and Christian Merkl

Journal of Economic Dynamics and Control, 2013, vol. 37, issue 3, 483-499

Abstract: Several contributions have recently assessed the size of fiscal multipliers both in RBC models and in New Keynesian models. This paper computes fiscal multipliers within a labor selection model with turnover costs and Nash bargained wages. We find that demand stimuli yield small multipliers, as they have little impact on hiring and firing decisions. By contrast, hiring subsidies, and short-time work (German “Kurzarbeit”) deliver large multipliers, as they stimulate job creation and employment.

Keywords: Fiscal multipliers; Fiscal packages; Labor markets; Short-time work; unemployment (search for similar items in EconPapers)
JEL-codes: E62 H20 H30 J20 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (57)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:37:y:2013:i:3:p:483-499

DOI: 10.1016/j.jedc.2012.09.004

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