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Regional Unemployment Disparities: Can Fiscal Policy Help?


Groenewold, N and Hagger, AJ, Regional Unemployment Disparities: Can Fiscal Policy Help?, Australian Journal of Labour Economics, 7, (1) pp. 13-37. ISSN 1328-1143 (2004) [Refereed Article]

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Copyright Statement

The Centre for Labour Market Research, 2004


Regional unemployment disparities are widely observed, appear to persist through time and are often a reason for concern on the part of both regional and national governments. This paper constructs asmall two-region general-equilibrium model and uses it to assess the effectiveness of traditional fiscal policy in combating regional unemployment disparities. The model is based on optimising behaviour of households and firms and incorporates inter-regional migration. It is calibrated using data Jor the Australian states and then simulated to evaluate the effects of expenditure changes by both regional and federal governments. In particular, we consider (iJ arise infederal government spending inoneregion, (ii)arise in regional government spending, (iii) a policy of 'unlocking theforests' in which a regional government increases the availability of regional natural resources, and (ivJ a general increase in federal government spending. The results are often surprising - only the fourth policy reduces unemployment in the high-unemployment region and all policies exacerbate the disparity.

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Applied economics
Research Field:Labour economics
Objective Division:Economic Framework
Objective Group:Other economic framework
Objective Field:Other economic framework not elsewhere classified
UTAS Author:Hagger, AJ (Dr Alfred Hagger)
ID Code:60913
Year Published:2004
Deposited By:Economics and Finance
Deposited On:2010-02-22
Last Modified:2010-05-13

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