A Theory of Countercyclical Government Multiplier

A-Tier
Journal: American Economic Journal: Macroeconomics
Year: 2014
Volume: 6
Issue: 1
Pages: 190-217

Score contribution per author:

4.022 = (α=2.01 / 1 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

I develop a New Keynesian model in which a type of government multiplier doubles when unemployment rises from 5 percent to 8 percent. This multiplier indicates the additional number of workers employed when one worker is hired in the public sector. Graphically, in equilibrium, an upward-sloping quasi-labor supply intersects a downward-sloping labor demand in a (employment, labor market tightness) plane. Increasing public employment stimulates labor demand, which increases tightness and therefore crowds out private employment. Critically, the quasi-labor supply is convex. Hence, when labor demand is depressed and unemployment is high, the increase in tightness and resulting crowding-out are small.

Technical Details

RePEc Handle
repec:aea:aejmac:v:6:y:2014:i:1:p:190-217
Journal Field
Macro
Author Count
1
Added to Database
2026-01-26