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Simple Analytics and Empirics of the Government Spending Multiplier and Other "Keynesian" Paradoxes

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  • Mulligan Casey B

    () (University of Chicago)

Abstract

Factor supply increases (depresses) output for many of the same reasons that the government spending multiplier might be less (greater) than one. Data from three 2008-9 recession episodes—the labor supply shifts associated with the seasonal cycle, the 2009 federal minimum wage hike, and the collapse of residential construction spending—clearly show that markets absorb an increased supply of factors of production by increasing output. The findings contradict the “paradox of toil” and suggest that government purchases and marginal tax rates reduce private consumption, even during the recession.

Suggested Citation

  • Mulligan Casey B, 2011. "Simple Analytics and Empirics of the Government Spending Multiplier and Other "Keynesian" Paradoxes," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-47, June.
  • Handle: RePEc:bpj:bejmac:v:11:y:2011:i:1:n:19
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    References listed on IDEAS

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    Cited by:

    1. Casey B. Mulligan, 2010. "Does Labor Supply Matter During a Recession? Evidence from the Seasonal Cycle," NBER Working Papers 16357, National Bureau of Economic Research, Inc.
    2. Piero Ferri, 2011. "Macroeconomics of Growth Cycles and Financial Instability," Books, Edward Elgar Publishing, number 14260, September.
    3. Galán Sofía & Puente Sergio, 2015. "Minimum Wages: Do They Really Hurt Young People?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 1-30, January.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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