Do Government Purchases Affect Unemployment?

42 Pages Posted: 8 Jun 2011

See all articles by Steinar Holden

Steinar Holden

University of Oslo - Department of Economics; Norges Bank; CESifo (Center for Economic Studies and Ifo Institute)

Victoria Sparrman

Statistics Norway; Statistics Norway

Multiple version iconThere are 3 versions of this paper

Date Written: May 31, 2011

Abstract

We investigate empirically the effect of government purchases on unemployment in 20 OECD countries, for the period 1960-2007. Compared to earlier studies we use a data set with more variation in unemployment, and which allows for controlling for a host of factors that influence the effect of government purchases. We find that increased government purchases lead to lower unemployment; an increase equal to one percent of GDP reduces unemployment by 0.2 percentage point in the same year. The effect is greater in downturns than in booms, and also greater under a fixed exchange rate regime than under a floating regime.

Keywords: fiscal policy, unemployment

JEL Classification: E620, H300

Suggested Citation

Holden, Steinar and Sparrman, Victoria, Do Government Purchases Affect Unemployment? (May 31, 2011). CESifo Working Paper Series No. 3482, Available at SSRN: https://ssrn.com/abstract=1860045 or http://dx.doi.org/10.2139/ssrn.1860045

Steinar Holden (Contact Author)

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47 22 85 51 56 (Phone)
+47 22 85 50 35 (Fax)

HOME PAGE: http://folk.uio.no/~sholden/

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Victoria Sparrman

Statistics Norway ( email )

0033 Oslo
Oslo
Norway

Statistics Norway ( email )

N-0033 Oslo
Norway

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