Fiscal Policy and Occupational Employment Dynamics
44 Pages Posted: 22 Jan 2017
Date Written: January 2017
We document substantial heterogeneity in occupational employment dynamics in response to government spending shocks. Employment rises most strongly in service, sales, and office ("pink-collar") occupations. By contrast, employment in blue-collar occupations is hardly affected by fiscal stimulus which is striking in light of its strong exposure to the cycle and its long-run decline due to technical change and globalization. We provide evidence that occupation-specific changes in labor demand are key to understand these findings and develop a business-cycle model that explains the heterogeneous occupational employment dynamics as a consequence of differences in the short-run substitutability between labor and capital services across occupations.
Keywords: fiscal policy, composition of employment, occupations, industries, heterogeneity
JEL Classification: E62, E24, J21, J23
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