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Fiscal Policy and the Fiction of Fungible Labor

In: Dollars, Euros, and Debt

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  • Vito Tanzi

Abstract

In this chapter we discuss some reasons why unemployment rates tend to remain high for a long time after the bursting of bubbles and why fiscal stimulus packages often tend to be disappointing in terms of job creation. This has clearly been the case in the most recent years in the countries that have experienced the Great Recession. The reason is mainly that labor is much less fungible than Keynesian fiscal policy has assumed it to be and that workers find it much more difficult to change jobs than assumed by Keynesian economics. Furthermore, it can be theorized that the difficulties described in this chapter are likely to grow as the countries’ economies become more advanced and complex.

Suggested Citation

  • Vito Tanzi, 2013. "Fiscal Policy and the Fiction of Fungible Labor," Palgrave Macmillan Books, in: Dollars, Euros, and Debt, chapter 9, pages 89-94, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-34647-6_9
    DOI: 10.1057/9781137346476_9
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