Template-type: ReDIF-Paper 1.0
Author-Name: Ryuta Ray Kato
Author-Name-First: Ryuta
Author-Name-Last: Kato
Author-Email: kato@iuj.ac.jp
Author-Workplace-Name: International University of Japan
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Author-Name: Hiroaki Miyamoto
Author-Name-First: Hiroaki
Author-Name-Last: Miyamoto
Author-Email: hmiyamot@iuj.ac.jp
Author-Workplace-Name: International University of Japan
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Title: Fiscal Stimulus in an Endogenous Job Separation Model
Abstract: This paper re-visits effects of fiscal expansion on employment and unemployment by focusing on both hiring and firing margins. We develop a dynamic stochastic general equilibrium model with labor search frictions in which job separation is endogenously determined. We study effects of fiscal stimuli in the form of government spending and hiring subsidies. The prediction of our model is in contrast with earlier studies that assume exogenous job separation. First, our model generates a larger size of the impact of a government spending shock on labor market variables than the model without endogenous separation. Second, while an increase in hiring subsidies increases employment and reduces unemployment in the model without endogenous separation, it reduces employment and increases unemployment in our model.
Classification-JEL: E24; E62; J64
Length: 28 pages
Creation-Date: 2013-01
Number: EMS_2013_02
File-URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2013_02.pdf
File-Format: Application/pdf
File-Function: First version, 2013
File-Size: 361KB
Keywords: Fiscal Policy, Unemployment, Labor market, Search and matching, Endogenous separation
Handle: RePEc:iuj:wpaper:EMS_2013_02