Taking off into the wind: Unemployment risk and state-Dependent government spending multipliers-'

• 成果类型: Article
• 署名作者: Albertini, Julien; Auray, Stephane; Bouakez, Hafedh; Eyquem, Aurelien
• 署名单位: Centre National de la Recherche Scientifique (CNRS); CNRS - Institute for Humanities & Social Sciences (INSHS); Ecole Normale Superieure de Lyon (ENS de LYON); Universite Claude Bernard Lyon 1; Universite Jean Monnet; Universite Lyon 2; Ecole Nationale de la Statistique et de l'Analyse de l'Information (ENSAI); Universite du Littoral-Cote-d'Opale; Universite de Montreal; HEC Montreal; Universite de Montreal; HEC Montreal; Institut Universitaire de France
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2020.07.007
• 发表日期: 2021
• 关键词: Government spending; multipliers; precautionary saving; state dependence; Unemployment risk

摘要

We propose a model with involuntary unemployment, incomplete markets, and nominal rigidity, in which the effects of government spending are state-dependent. An increase in government purchases raises aggregate demand, tightens the labor market and reduces unemployment. This in turn lowers unemployment risk and thus precautionary saving, leading to a larger response of private consumption than in a model with perfect insurance. The output multiplier is further amplified through a composition effect, as the fraction of high-consumption households in total population increases in response to the spending shock. These features, along with the matching frictions in the labor market, generate significantly larger multipliers in recessions than in expansions. As the pool of job seekers is larger during downturns than during expansions, the concavity of the job-finding probability with respect to market tightness implies that an increase in government spending reduces unemployment risk more in the former case than in the latter, giving rise to counter-cyclical multipliers. (C) 2020 Elsevier B.V. All rights reserved.