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Externality in labor supply and government spending

  • Fève, Patrick
  • Matheron, Julien
  • Sahuc, Jean-Guillaume

Standard business cycle models face difficulties generating (i) government spending multipliers exceeding unity and (ii) stabilizing effects of government size. Using a simple model with externality in labor supply, we show that a sufficient degree of complementarity between aggregate and private labor supplies is key to reproducing these stylized facts.

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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 112 (2011)
Issue (Month): 3 (September)
Pages: 273-276

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Handle: RePEc:eee:ecolet:v:112:y:2011:i:3:p:273-276
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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