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Fiscal Calculus and the Labor Market

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Author Info

  • Campolmi Alessia

    ()
    (Central European University and Magyar Nemzeti Bank)

  • Faia Ester

    ()
    (Goethe University Frankfurt)

  • Winkler Roland

    ()
    (TU Dortmund University)

Abstract

The endorsement of expansionary fiscal packages has often been based on the idea that large multipliers can counteract rising and persistent unemployment. We explore the effectiveness of fiscal stimuli in a model with matching frictions and endogenous participation. Results show that hiring subsidies, contrary to increase in government spending, deliver large multipliers, even with distortionary taxation. Those policies increase the incentives to post vacancies, hence employment. Furthermore, by reducing marginal costs they also reduce inflation and increase private consumption.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 11 (2011)
Issue (Month): 1 (December)
Pages: 1-27

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Handle: RePEc:bpj:bejmac:v:11:y:2011:i:1:n:38

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Web page: http://www.degruyter.com

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Cited by:
  1. Chun-Hung Kuo & Hiroaki Miyamoto, 2014. "Fiscal Stimuli in the Form of Job Creation Subsidies," Working Papers EMS_2014_06, Research Institute, International University of Japan.
  2. Chun-Hung Kuo & Hiroaki Miyamoto, 2014. "Fiscal Stimulus and Unemployment Dynamics," Working Papers EMS_2014_05, Research Institute, International University of Japan.
  3. Snower, Dennis J. & Lechthaler, Wolfgang, 2013. "Worker Identity, Employment Fluctuations and Stabilization Policy," IZA Discussion Papers 7413, Institute for the Study of Labor (IZA).
  4. Ryuta Ray Kato & Hiroaki Miyamoto, 2013. "Fiscal Stimulus in an Endogenous Job Separation Model," Working Papers EMS_2013_02, Research Institute, International University of Japan.

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