Patrick Fève, Julien Matheron et Jean-Guillaume Sahuc, « Externality in labor supply and government spending », Economics Letters, Elsevier, vol. 112, n° 3, septembre 2011, p. 273–276.


Standard business cycle models face difficulties generating (i) government spending multipliers exceeding unity and (ii) stabilizing effects of government size. Using a simple model with externality in labor supply, we show that a sufficient degree of complementarity between aggregate and private labor supplies is key to reproducing these stylized facts.


Externality; Labor supply; Government spending multiplier; Government size;

Codes JEL

  • E32: Business Fluctuations • Cycles
  • E63: Comparative or Joint Analysis of Fiscal and Monetary Policy • Stabilization • Treasury Policy