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The Impact of Disguised Unemployment over Fiscal Multipliers in Brazil (2012-2024)

Author

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  • Henrique Salviano Fernandes
  • Jose Luis Oreiro

Abstract

This paper investigates the relationship between the fiscal multiplier and disguised unemployment in Brazil, focusing on the effectiveness of fiscal policies in scenarios of underutilization of the workforce. Based on a review of pre-existing literature for calculating disguised unemployment in Brazil and the application of a vector autoregressive (VAR) model, the impacts of fiscal shocks on GDP and the rates of open and disguised unemployment were analyzed. Data suggests the existence of disguised unemployment in Brazil, especially in the traditional services sector. In addition, the results indicate that investment and other expenditures shocks have the highest positive fiscal multipliers, while payroll expenditures have a negative impact. Finally, the analysis also highlights that fiscal policies aimed at increasing income transfers could be a viable way of reducing disguised unemployment.

Suggested Citation

  • Henrique Salviano Fernandes & Jose Luis Oreiro, 2025. "The Impact of Disguised Unemployment over Fiscal Multipliers in Brazil (2012-2024)," Working Papers PKWP2502, Post Keynesian Economics Society (PKES).
    • Handle: RePEc:pke:wpaper:pkwp2502
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    File URL: https://postkeynesian.net/media/working-papers/PKWP2502.pdf
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    References listed on IDEAS

    as
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    3. Valerie A. Ramey, 2019. "Ten Years after the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?," Journal of Economic Perspectives, American Economic Association, vol. 33(2), pages 89-114, Spring.
    4. Monacelli, Tommaso & Perotti, Roberto & Trigari, Antonella, 2010. "Unemployment fiscal multipliers," Journal of Monetary Economics, Elsevier, vol. 57(5), pages 531-553, July.
    5. Eatwell, John & Milgate, Murray, 2011. "The Fall and Rise of Keynesian Economics," OUP Catalogue, Oxford University Press, number 9780199777693, Decembrie.
    6. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
    7. Valerie A. Ramey & Sarah Zubairy, 2018. "Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data," Journal of Political Economy, University of Chicago Press, vol. 126(2), pages 850-901.
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    More about this item

    Keywords

    Fiscal multiplier; Disguised unemployment; Fiscal policy; Labor market;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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