Do differences in international labor mobility lead to differences in the fiscal multiplier? A theoretical approach

Andrea Corina Pfammatter

MPRA Paper from University Library of Munich, Germany

Abstract: A real business cycle economy with endogenous labor supply and heterogeneous households is modeled. I allow for different degrees of labor migration to assess potential differences in the effects of changes in government consumption on aggregate economic activity. I argue that a relatively elastic labor migration with respect to economic activity may have a positive effect on the effectiveness of fiscal policy because labor migration may influence labor market adjustments after a positive government consumption shock. The findings suggest that there is a positive relationship between labor migration elasticity and the size of the fiscal multiplier. However, whether the relationship is economically meaningful is uncertain and requires further research.

Keywords: Fiscal multiplier; fiscal policy; RBC model; international labor migration (search for similar items in EconPapers)
JEL-codes: F22 F44 H3 J61 (search for similar items in EconPapers)
Date: 2015-09-28
New Economics Papers: this item is included in nep-dge, nep-mig and nep-pbe
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