Externality in labor supply and government spending |
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Authors: | Patrick Fève Julien MatheronJean-Guillaume Sahuc |
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Institution: | a Toulouse School of Economics (GREMAQ, IDEI, and IUF), Franceb Banque de France, Francec EDHEC Business School, France |
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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. |
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Keywords: | E32 E63 |
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