Series: IMF Working Papers
Author(s): Juin-Jen Chang , Hsieh-Yu Lin , Nora Traum , and Shu-Chun Susan Yang
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 10 June 2019
Keywords: Public sector wages, Real interest rates, Income tax revenue, Wage policy, Consumption taxes, public wage, fiscal consolidation, government spending, fiscal policy, New Keynesian model
A New Keynesian model with government production, public compensation, and unemployment is fit to U.S. data to study the macroeconomic and fiscal effects of public wage reductions. We find that accounting for the t...