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FISCAL SHOCKS AND REAL WAGES
Author(s) -
Bénétrix Agustín S.
Publication year - 2012
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.452
Subject(s) - economics , wage , government spending , fiscal policy , real wages , investment (military) , monetary economics , government (linguistics) , macroeconomics , labour economics , linguistics , philosophy , politics , political science , law , welfare , market economy
This paper studies the impact of fiscal shocks in a panel of eleven euro area member countries. It contributes to the existing literature by providing new empirical evidence on the effects of different types of spending shocks on real wages. The main finding is that an increase in government spending raises the real wage. However, its magnitude depends on the spending type. Shocks to government investment and to the number of public employees generate responses that are at the extremes of the wage response spectrum. The former produces the greatest effect, whereas the latter has zero impact. Copyright © 2011 John Wiley & Sons, Ltd.