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Fiscal Shocks and Real Wages

Agustin S. Benetrix
Institute for International Integration Studies, Trinity College Dublin


I estimate the short-run dynamic effect of fiscal shocks on real wages for a panel of euro
area countries. The main findings are in line with the Neo-Keynesian predictions that real
wages increase in response to spending shocks. However, the scale of the wage response
depends on the type of government spending.

Last updated 28 August 2014 by IIIS (Email).