In a monopolistic competition macromodel with endogenous market structure, the fiscal multiplier is shown to consist of two components. The first depicts the response of output to a fiscal expansion through the conventional channels that disregard the role of market imperfections. The second...

It is argued that increases in government spending that take the form of increases in government employment can have a negative impact on private-sector employment by increasing real wages. In fact, once the supply reducing effects of higher taxes needed to finance the increase in government...

In contrast to much recent work regarding the causes of European unemployment, in this paper we emphasize the importance of capital accumulation. But unlike the few previous studies which have examined the relationship between capital accumulation and unemployment, we argue that what matters for...