Employment, fiscal Policy and Oligopsonistic Labour Market

Toshiki Tamai

Australian Journal of Labour Economics (AJLE), 2009, vol. 12, issue 3, 321-337

Abstract: This paper presents an investigation of the dynamic effects of fiscal policy in an inter-temporal optimisation model with an oligopsonistic labour market. In an oligopsonistic labour market, fiscal policy expands employment through a shift of labour demand and supply curves. Fiscal policy has a positive effect on physical capital. Consequently, fiscal expansion stimulates not only employment but also aggregate output. However, an increase in government spending that does not generate benefits cannot improve welfare. The extended model provides conditions for justification of active fiscal policy.

Keywords: Demand and Supply of Labour: General; General Aggregative Models: General; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital (search for similar items in EconPapers)
JEL-codes: E10 E24 J20 (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ozl:journl:v:12:y:2009:i:3:p:321-337

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