Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5060314 | Economics Letters | 2011 | 4 Pages |
Abstract
Standard business cycle models face difficulties generating (i) government spending multipliers exceeding unity and (ii) stabilizing effects of government size. Using a simple model with externality in labor supply, we show that a sufficient degree of complementarity between aggregate and private labor supplies is key to reproducing these stylized facts.
⺠We develop a simple equilibrium model with labor supply externality. ⺠Allowing for a labor supply externality leads to government spending multipliers exceeding unity. ⺠A sufficient degree of complementarity between aggregate and private labor supplies generates stabilizing effects of government size.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Patrick Fève, Julien Matheron, Jean-Guillaume Sahuc,