Do differences in international labor mobility lead to differences in the fiscal multiplier? A theoretical approach

Pfammatter, Andrea Corina (2015): Do differences in international labor mobility lead to differences in the fiscal multiplier? A theoretical approach.

Abstract

A real business cycle economy with endogenous labor supply and heterogeneous households is modeled. I allow for different degrees of labor migration to assess potential differences in the effects of changes in government consumption on aggregate economic activity. I argue that a relatively elastic labor migration with respect to economic activity may have a positive effect on the effectiveness of fiscal policy because labor migration may influence labor market adjustments after a positive government consumption shock. The findings suggest that there is a positive relationship between labor migration elasticity and the size of the fiscal multiplier. However, whether the relationship is economically meaningful is uncertain and requires further research.

• Item Type: MPRA Paper
• Language: English
• Keywords: Fiscal multiplier, fiscal policy, RBC model, international labor migration
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F44 - International Business Cycles; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers

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