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Spatial Variations in Unemployment and Inflation: Some Implications for Fiscal Policy

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  • David B. Johnson

    (Louisiana State University)

  • Thomas R. Beard

    (Louisiana State University)

  • Garyl. Carson

    (Northwestern University)

Abstract

In this paper we consider the spatial dispersion of unemployment vis-Ã -vis that of inflation and the implication of this relative dispersion for fiscal policy. Two empirical tests yield results that are consistent with our a priori expectations that inflation is more evenly distributed throughout the economy (i.e., less dispersed spatially) than is unemployment. Using a simple short-run model, we argue that tax policy should be geared to a price stability objective and expenditure policy to a full employment objective. Consequently, the Phillips curve dilemma could be lessened by the appropriate use of tax and expenditure policy.

Suggested Citation

  • David B. Johnson & Thomas R. Beard & Garyl. Carson, 1978. "Spatial Variations in Unemployment and Inflation: Some Implications for Fiscal Policy," Public Finance Review, , vol. 6(4), pages 455-472, October.
    • Handle: RePEc:sae:pubfin:v:6:y:1978:i:4:p:455-472
    DOI: 10.1177/109114217800600405
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    References listed on IDEAS

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    1. Fromm, Gary & Klein, Lawrence R, 1973. "A Comparison of Eleven Econometric Models of the United States," American Economic Review, American Economic Association, vol. 63(2), pages 385-393, May.
    2. Schink, George R, 1975. "The Brookings Qtrly Model: As an Aid to Longer Term Economic Policy Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(1), pages 39-53, February.
    3. Richard N. Cooper, 1969. "Macroeconomic Policy Adjustment in Interdependent Economies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 83(1), pages 1-24.
    4. Hickman, Bert G & Coen, Robert M & Hurd, Michael D, 1975. "The Hickman-Coen Annual Growth Model: Structural Characteristics and Policy Responses," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 16(1), pages 20-37, February.
    5. Donald J. Mathieson, 1975. "Monetary Policy in an Inside-Money, Open Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 89(1), pages 81-102.
    6. David J. Ott & Attiat F. Ott, 1968. "Monetary and Fiscal Policy: Goals and the Choice of Instruments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(2), pages 313-325.
    7. George L. Perry, 1970. "Changing Labor Markets and Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 411-448.
    8. Archibald, G C, 1969. "The Phillips Curve and the Distribution of Unemployment," American Economic Review, American Economic Association, vol. 59(2), pages 124-134, May.
    9. Helliwell, John F, 1969. "Monetary and Fiscal Policies for an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 21(1), pages 35-55, March.
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    Cited by:

    1. O. Izraeli & M. Kellman, 1982. "Inflationary Expectations, Taxes and the Political Business Cycle: a Local Labor Market Perspective," Urban Studies, Urban Studies Journal Limited, vol. 19(1), pages 33-41, February.

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