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A micro-founded comparison of fiscal policies between indirect and direct job creation

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  • Kensuke Ohtake

Abstract

The purpose of this paper is to provide a micro-economic foundation for an argument that the direct employment by the government is more desirable than the government purchase of private goods to eliminate unemployment. A general equilibrium model with monopolistic competition is devised, and the effects of policies (government purchase, tax rate operation, and government employment) on macroeconomic variables (consumption, price, and profit) are investigated. It is shown that 1) the government purchase is inflationary in the sense that additional effective demand by the government not only increases private employment but also raises prices; 2) the government employment can achieve full employment without causing a rise in prices.

Suggested Citation

  • Kensuke Ohtake, 2023. "A micro-founded comparison of fiscal policies between indirect and direct job creation," Papers 2304.04506, arXiv.org, revised Feb 2024.
    • Handle: RePEc:arx:papers:2304.04506
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    References listed on IDEAS

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    5. Benassy, Jean-Pascal, 1986. "Macroeconomics: An Introduction to the Non-Walrasian Approach," Elsevier Monographs, Elsevier, edition 1, number 9780120864256 edited by Shell, Karl.
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