NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Simple Analytics and Empirics of the Government Spending Multiplier and Other "Keynesian" Paradoxes

Casey B. Mulligan

NBER Working Paper No. 15800
Issued in March 2010
NBER Program(s):   EFG   PE

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.

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This paper was revised on December 5, 2011

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Document Object Identifier (DOI): 10.3386/w15800

Published: Mulligan Casey B, 2011. "Simple Analytics and Empirics of the Government Spending Multiplier and Other "Keynesian" Paradoxes," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-47, June. citation courtesy of

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