Public spending, market imperfections and unemployment
نویسندگان
چکیده
This paper proposes a generalized WS/PS model studying the impact of public spending on employment, in the presence of imperfect competition in labour and product markets. Public spending is shown to a¤ect rms pro t margins and rms labour demand schedules. The model highlights a new channel by which scal policy can improve employment. By reducing rmsmark-up, public spending helps countering the adverse e¤ects of market power in imperfectly competitive goods markets. JEL Classi cation System: E24, F02, F42, J41 Key-words: equilibrium unemployment, imperfect competition, public spending
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