Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129991
Authors: 
Angelopoulos, Konstantinos
Jiang, Wei
Malley, James
Year of Publication: 
2015
Series/Report no.: 
School of Economics Discussion Papers 1502
Abstract: 
This paper evaluates the effects of policy interventions on sectoral labour markets and the aggregate economy in a business cycle model with search and matching frictions. We extend the canonical model by including capital-skill complementarity in production, labour markets with skilled and unskilled workers and on-the-job-learning (OJL) within and across skill types. We first find that, the model does a good job at matching the cyclical properties of sectoral employment and the wage-skill premium. We next find that vacancy subsidies for skilled and unskilled jobs lead to output multipliers which are greater than unity with OJL and less than unity without OJL. In contrast, the positive output effects from cutting skilled and unskilled income taxes are close to zero. Finally, we find that the sectoral and aggregate effects of vacancy subsidies do not depend on whether they are financed via public debt or distorting taxes.
Subjects: 
fiscal multipliers
sectoral labour markets
search and matching
JEL: 
E24
E32
J63
J64
J68
Document Type: 
Working Paper

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