Sectoral labor market effects of fiscal spending

Dennis Wesselbaum

Structural Change and Economic Dynamics, 2015, vol. 34, issue C, 19-35

Abstract: This paper studies sectoral effects of fiscal spending. We estimate a New Keynesian model with search and matching frictions and two sectors. Fiscal spending is either wasteful (consumption) or productivity enhancing (investment). Using U.S. data we find significant differences across sectors. Further, we show that government investment rather than consumption shocks are driver of fluctuations in sectoral and aggregate outputs and labor market variables. Finally, government investment shocks are much more effective in stimulating the economy than spending shocks. However, this comes at the cost of an increase in the unemployment rate.

Keywords: Government consumption; Government investment; Search and matching; Sectoral effects (search for similar items in EconPapers)
JEL-codes: C11 E32 E62 H5 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Sectoral Labor Market Effects of Fiscal Spending (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:34:y:2015:i:c:p:19-35

DOI: 10.1016/j.strueco.2015.05.002

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