Working Paper: NBER ID: w15800
Authors: Casey B. Mulligan
Abstract: Factor supply increases (depresses) output for many of the same reasons that the government spending multiplier might be less (greater) than one. Data from three 2008-9 recession episodes - the labor supply shifts associated with the seasonal cycle, the 2009 federal minimum wage hike, and the collapse of residential construction spending - clearly show that markets absorb an increased supply of factors of production by increasing output. The findings contradict the "paradox of toil" and suggest that the government spending multiplier is less than one, even during the recession.
Keywords: No keywords provided
JEL Codes: E24; E62; H3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increases in factor supply during the recession (J20) | increased output (E23) |
| government spending multiplier < 1 (E62) | government spending does not effectively stimulate private spending (E62) |
| federal minimum wage hike (J38) | significant reduction in part-time employment (J22) |
| collapse of residential construction (L74) | crowds out non-residential investment (E22) |
| increased government spending (H59) | not proportional increases in private sector output (E23) |