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Towards a quantitative theory of automatic stabilizers: The role of demographics

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  • Janiak, Alexandre
  • Santos Monteiro, Paulo

Abstract

Employment volatility is larger for young and old workers than for the prime aged. At the same time, in countries with high tax rates, the share of total hours supplied by young/old workers is lower. These two observations imply a negative correlation between government size and business cycle volatility. This paper assesses in a heterogeneous agent OLG model the quantitative importance of these two facts to account for the empirical relation between government size and macroeconomic stability.

Suggested Citation

  • Janiak, Alexandre & Santos Monteiro, Paulo, 2016. "Towards a quantitative theory of automatic stabilizers: The role of demographics," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 35-49.
  • Handle: RePEc:eee:moneco:v:78:y:2016:i:c:p:35-49
    DOI: 10.1016/j.jmoneco.2015.12.006
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    More about this item

    Keywords

    Automatic stabilizers; Distortionary taxes; Demographics;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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