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Towards a quantitative theory of automatic stabilizers: the role of demographic

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JournalJournal of Monetary Economics
DateAccepted/In press - 14 Dec 2015
DateE-pub ahead of print - 4 Jan 2016
DatePublished (current) - Apr 2016
Volume78
Number of pages15
Pages (from-to)35-49
Early online date4/01/16
Original languageEnglish

Abstract

Employment volatility is larger for young and old workers than for the prime aged. At the same time, in countries with high tax rates, the share of total hours supplied by young/old workers is lower. These two observations imply a negative correlation between government size and business cycle volatility. This paper assesses in a heterogenous agent OLG model the quantitative importance of these two facts to account for the empirical relation between government size and macroeconomic stability.

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Accepted for publication on the 14/12/2015
This is an author produced version of a paper accepted for publication in Journal of Monetary Economics. Uploaded in accordance with the publisher's self-archiving policy.

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