Towards a quantitative theory of automatic stabilizers: The role of demographics

TY - JOUR

T1 - Towards a quantitative theory of automatic stabilizers

T2 - The role of demographics

AU - Janiak, Alexandre

AU - Santos Monteiro, Paulo

N1 - 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.

PY - 2016/4/1

Y1 - 2016/4/1

N2 - 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.

AB - 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.

KW - Automatic stabilizers

KW - Demographics

KW - Distortionary taxes

UR - http://www.scopus.com/inward/record.url?scp=84962071106&partnerID=8YFLogxK

U2 - 10.1016/j.jmoneco.2015.12.006

DO - 10.1016/j.jmoneco.2015.12.006

M3 - Article

SN - 0304-3932

VL - 78

SP - 35

EP - 49

JO - Journal of Monetary Economics

JF - Journal of Monetary Economics

ER -