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

  • Casey B. Mulligan

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 the government spending multiplier is less than one, even during the recession.

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File URL: http://www.nber.org/papers/w15800.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15800.

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Date of creation: Mar 2010
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Publication status: published as 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:nbr:nberwo:15800
Note: EFG PE
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