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Public investment and labor market flexibility

Author

Listed:
  • Chun-Hung Kuo

    (National Tsing Hua University)

  • Hiroaki Miyamoto

    (Tokyo Metropolitan University)

Abstract

This paper examines how labor market flexibility affects the output effect of a public investment shock by using panel data from OECD countries. We identify the public investment shock as a public investment spending forecast error and employ the local projection method to estimate its effect on output. Our empirical analysis shows that labor market flexibility affects the output effect of the public investment shock. While a positive public investment shock boosts output significantly in economies with flexible labor markets, output responses are not statistically significant in economies with rigid labor markets.

Suggested Citation

  • Chun-Hung Kuo & Hiroaki Miyamoto, 2023. "Public investment and labor market flexibility," Economics Bulletin, AccessEcon, vol. 43(2), pages 1122-1132.
    • Handle: RePEc:ebl:ecbull:eb-23-00006
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Public investment; fiscal multipliers; labor market flexibility;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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