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Public Consumption and Unemployment

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  • Zoega, Gylfi

Abstract

This paper introduces public consumption--hence the size of the public sector--into an efficiency wage model of the labor market. The effect of a simultaneous rise in taxes and public consumption on unemployment is derived. There arises an unambiguous positive relationship between the size of the public sector and equilibrium unemployment if public and private consumption are substitutes and wages are taxed. The impact of taxes on consumption on unemployment, although in general not equal to zero, is ambiguous. Copyright 1997 by Scottish Economic Society.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 44 (1997)
Issue (Month): 3 (August)
Pages: 269-79

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Handle: RePEc:bla:scotjp:v:44:y:1997:i:3:p:269-79

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Cited by:
  1. Laszlo Goerke, 1999. "Value-Added Tax versus Social Security Contributions," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 219(3+4), pages 308-325, September.

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