FISCAL STIMULUS WITH LEARNING‐BY‐DOING

Antonello D'Alessandro, Giulio Fella and Leonardo Melosi

International Economic Review, 2019, vol. 60, issue 3, 1413-1432

Abstract: Using a Bayesian structural vector autoregression analysis, we document that an increase in government purchases raises private consumption, the real wage, and total factor productivity (TFP) while reducing inflation. These three facts are hard to reconcile with both neoclassical and New Keynesian models. We extend a standard New Keynesian model to allow for skill accumulation through past work experience. An increase in government spending increases hours and induces skill accumulation and higher measured TFP and real wages in subsequent periods. Future marginal costs fall lowering expected inflation and, through the monetary policy rule, the real interest rate. Consumption increases as a result.

Date: 2019
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https://doi.org/10.1111/iere.12391

Related works:
Working Paper: Fiscal Stimulus with Learning-By-Doing (2018)
Working Paper: Fiscal stimulus with learning-by-doing (2018)
Working Paper: Fiscal Stimulus with Learning-By-Doing (2018)
Working Paper: Fiscal Stimulus with Learning-By-Doing (2017)
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