Fiscal Policy Can Raise Both Employment and Productivity
According to the conventional wisdom, we face a trade-off between our equity and efficiency objectives. The author challenges this proposition. He shows in a rigorous manner that employment subsidies can indeed lead to lower unemployment and higher productivity growth in a standard economic model. This finding is particularly timely given the announcement by the Canadian government in the November 2005 Economic and Fiscal Update of a Working Income Tax Benefit. The author approvingly notes that this initiative suggests that the government may be starting to appreciate the pro-growth benefits of simultaneously addressing structural unemployment and inequality.
Volume (Year): 11 (2005)
Issue (Month): (Fall)
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References listed on IDEAS
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- N. Gregory Mankiw, 1999.
"The Savers-Spenders Theory of Fiscal Policy,"
Harvard Institute of Economic Research Working Papers
1888, Harvard - Institute of Economic Research.
- Michelle Alexopoulos, 2003. "Growth and unemployment in a shirking efficiency wage model," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 728-746, August.
- Osberg, L., 1995. "The Equity/Efficiency Trade-Off in Retrospect," Department of Economics at Dalhousie University working papers archive 95-04, Dalhousie, Department of Economics.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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