Public Investment and Labor Market Flexibility

Chun-Hung Kuo and Hiroaki Miyamoto
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Chun-Hung Kuo: National Tsing Hua University

No SDES-2020-16, Working Papers from Kochi University of Technology, School of Economics and Management

Abstract: This paper examines how labor market flexibility affects the output effect of a public investment shock by using a panel data of OECD countries. We identify the public investment shock as a forecast error of public investment spending and employ the local projection method to estimate its effect on output. Our empirical analysis shows that labor market flexibility affects the output effect of the public investment shock. While a positive public investment shock boosts output significantly in economies with flexible labor markets, output responses are not statistically significant in economies with rigid labor markets.

Keywords: Public investment; fiscal multipliers; labor market flexibility (search for similar items in EconPapers)
Pages: 10 pages
Date: 2020-12, Revised 2020-12
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Published in SDE Series, December 2020, pages 1-10

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http://www.souken.kochi-tech.ac.jp/seido/wp/SDES-2020-16.pdf First version, 2020 (application/pdf)

Related works:
Journal Article: Public investment and labor market flexibility (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:kch:wpaper:sdes-2020-16

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