Abstract

http://ssrn.com/abstract=1333890
 
 

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The Effects of Fiscal Shocks on Employment and the Real Wage


Evi Pappa


affiliation not provided to SSRN


International Economic Review, Vol. 50, Issue 1, pp. 217-244, February 2009

Abstract:     
We study the transmission of fiscal shocks in the labor market. We employ a structural VAR and base identification on the restrictions that shocks to government consumption, investment, and employment must raise output and deficits. These restrictions hold in both prototype Real Business Cycle (RBC) and New Keynesian models. Shocks to government consumption and investment increase real wages and employment contemporaneously, both at state level and in the aggregate. The dynamics in response to employment shocks are mixed: Increases in government employment raise the real wage and total employment in the aggregate. However, in one third of the states they reduce total employment.

Number of Pages in PDF File: 28

Accepted Paper Series


Date posted: January 29, 2009  

Suggested Citation

Pappa, Evi, The Effects of Fiscal Shocks on Employment and the Real Wage. International Economic Review, Vol. 50, Issue 1, pp. 217-244, February 2009. Available at SSRN: http://ssrn.com/abstract=1333890 or http://dx.doi.org/10.1111/j.1468-2354.2008.00528.x

Contact Information

Evi Pappa (Contact Author)
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References:  38
Citations:  17

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