02051cas a2200277 a 4500 AALejournalIMF019347 230101c9999 xx r poo 0 0eng d 5.00 USD 9781498316835 1018-5941 BD-DhAAL BD-DhAAL Chang, Juin-Jen. Fiscal Consolidation and Public Wages / Juin-Jen Chang, Hsieh-Yu Lin, Nora Traum, Shu-Chun Susan Yang. Washington, D.C. : International Monetary Fund, 2019. 1 online resource (52 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students 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. Mode of access: Internet Lin, Hsieh-Yu. Susan Yang, Shu-Chun. Traum, Nora. IMF Working Papers; Working Paper ; No. 2019/125 Full text available on IMF http://elibrary.imf.org/view/journals/001/2019/125/001.2019.issue-125-en.xml IMF e-Library