Fiscal calculus and the labor market

Campolmi, A., Faia, E. and Winkler, R. (2011) Fiscal calculus and the labor market. B.E. Journal of Macroeconomics, 11(1), p. 38. (doi: 10.2202/1935-1690.2280)

Abstract

The endorsement of expansionary fiscal packages has often been based on the idea that large multipliers can counteract rising and persistent unemployment. We explore the effectiveness of fiscal stimuli in a model with matching frictions and endogenous participation. Results show that hiring subsidies, contrary to increase in government spending, deliver large multipliers, even with distortionary taxation. Those policies increase the incentives to post vacancies, hence employment. Furthermore, by reducing marginal costs they also reduce inflation and increase private consumption.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Campolmi, Dr Alessia
• Authors: Campolmi, A., Faia, E., and Winkler, R.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: B.E. Journal of Macroeconomics
• Publisher: De Gruyter
• ISSN: 2194-6116
• ISSN (Online): 1935-1690
• Copyright Holders: Copyright © 2011 De Gruyter
• First Published: First published in B.E. Journal of Macroeconomics 11(1):38
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher