TY - BOOK ID - 85503926 TI - Fiscal Consolidation and Public Wages AU - Chang, Juin-Jen. AU - Lin, Hsieh-Yu. AU - Shu-Chun, Susan Yang. AU - Traum, Nora. PY - 2019 SN - 1498320260 1498320236 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Fiscal policy. KW - Tax policy KW - Taxation KW - Economic policy KW - Finance, Public KW - Government policy KW - Labor KW - Macroeconomics KW - Fiscal Policy KW - Business Fluctuations KW - Cycles KW - Bayesian Analysis: General KW - Wages, Compensation, and Labor Costs: General KW - Labor Economics: General KW - Employment KW - Unemployment KW - Wages KW - Intergenerational Income Distribution KW - Aggregate Human Capital KW - Aggregate Labor Productivity KW - Labour KW - income economics KW - Public employment KW - Real wages KW - Wage adjustments KW - Labor economics KW - Economic theory KW - United States KW - Income economics UR - https://www.unicat.be/uniCat?func=search&query=sysid:85503926 AB - 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 type of government spending is crucial for its macroeconomic implications. Although reductions in public wages and government purchases of goods have similar effects on total output and the fiscal balance, the former can raise private output slightly, in contrast to the substantial contractionary effects of the latter. In addition, the baseline estimation finds that exogenous public wage reductions decrease private wages. Model counterfactuals show that sufficiently rigid nominal private wages can reverse the response of private wages, as the rigidity dampens the labor reallocation effect from the public to private sector that exerts downward pressure on private wages. ER -