Emigration and fiscal austerity in a depression
Bandeira, Guilherme (New South Wales Treasury)
Caballé, Jordi (Universitat Autònoma de Barcelona)
Vella, Eugenia (Athens University of Economics and Business)

Fecha:	2022
Resumen:	What is the role of emigration in a deep recession when the government implements fiscal consolidation? To answer this question, we build a small open economy New Keynesian model with matching frictions and emigration. In simulations for the Greek Depression, fiscal austerity accounts for almost 1/3 of the GDP decline and 12% of emigration. A no-migration scenario under-predicts the bust in output by 1/6 and the rise in the debt-to-GDP ratio by 8 percentage points. The link between emigration and austerity is bi-directional. Emigration increases the labour tax hike and time required to reduce the debt ratio due to endogenous revenue leakage. In turn, tax hikes intensify emigration, while unproductive government spending cuts have a mild, ambiguous impact as they exhibit opposite demand and wealth effects. However, productive spending cuts display a fiscal multiplier above one, which incentivizes emigration. Emigration then amplifies the productive spending multiplier through internal demand. Similarly, the cumulative labour tax multiplier after five years rises from 0. 86 without migration to 1. 27 when the unemployed emigrate and 1. 47 when both the unemployed and the employed emigrate.
Ayudas:	Agència de Gestió d'Ajuts Universitaris i de Recerca 2017/SGR-1765 European Commission 649396 European Commission 798015 Ministerio de Ciencia e Innovación PID2021-122605NB-100
Nota:	Altres ajuts: acords transformatius de la UAB
Derechos:	Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, la comunicació pública de l'obra i la creació d'obres derivades, sempre que no sigui amb finalitats comercials, i sempre que es reconegui l'autoria de l'obra original.
Lengua:	Anglès
Documento:	Article ; recerca ; Versió publicada
Materia:	Emigration ; Fiscal austerity ; Fiscal multipliers ; Greek crisis ; Matching frictions ; On-the-job search ; SDG 10 - Reduced Inequalities
Publicado en:	Journal of economic dynamics & control, Vol. 144 (2022) , p. 104539, ISSN 0165-1889

DOI: 10.1016/j.jedc.2022.104539

26 p, 4.5 MB

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