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Fiscal Policy And Economic Growth In The Imperfect Labor Market

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  • Koji Kitaura

Abstract

Using a simple overlapping generations model with the growth engine of public capital by incorporating the union wage setting, we examine the effects of fiscal policies on unemployment, economic growth and welfare in the imperfect labor market. We demonstrate that the growth‐maximizing tax in the imperfect labor market is larger than that of the perfect labor market. However, as the allocation ratio of public capital increases, the growth‐maximizing tax in the imperfect labor market approaches that of the perfect labor market, thus reducing the unemployment rate. The policy implications of the intergenerational welfare aspects are also mentioned.

Suggested Citation

  • Koji Kitaura, 2010. "Fiscal Policy And Economic Growth In The Imperfect Labor Market," Metroeconomica, Wiley Blackwell, vol. 61(4), pages 686-700, November.
    • Handle: RePEc:bla:metroe:v:61:y:2010:i:4:p:686-700
    DOI: 10.1111/j.1467-999X.2010.04095.x
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    References listed on IDEAS

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    Cited by:

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    2. Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2020. "Union, Efficiency of Labour and Endogenous Growth," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 61(2), pages 170-202, December.
    3. Chandril Bhattacharyya & Manash Ranjan Gupta, 2015. "Unionized Labour Market, Unemployment Allowances, Productive Public Expenditure And Endogenous Growth," Metroeconomica, Wiley Blackwell, vol. 66(3), pages 397-425, July.

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