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The impact of policy uncertainty on U. S. employment: industry evidence

J. Christina Wang

Public Policy Brief, 2013

Abstract: The anemic pace of the recovery of the U. S. economy from the Great Recession has frequently been blamed on heightened uncertainty, much of which concerns the nation’s fiscal policy. Intuition suggests that increased policy uncertainty likely has different impacts on different industries, to the extent that industries differ in their exposure to government policies. This study utilizes industry data to explore whether policy uncertainty indeed affects the dynamics of employment, and particularly its impact on industry employment, during this recovery. This analysis focuses on heterogeneity across industries in terms of the fraction of their product demand that can ultimately be attributed to federal government expenditures. The estimation results reveal that policy uncertainty indeed retards employment growth more in industries that rely more heavily on federal government demand: the growth rate of employment in these industries appears to have been four-tenths of a percentage point lower during the quarters in recent years when policy uncertainty spiked.

Keywords: uncertainty; fiscal policy; input-output tables; industry accounts; employment; hours (search for similar items in EconPapers)
JEL-codes: D57 D80 E24 E66 G18 L50 (search for similar items in EconPapers)
Date: 2013
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