Wei-Fong Pan – “The Labour Market Effect of Fiscal Policy Uncertainty” (PhD Seminar)

Abstract

This study examines the effect of fiscal policy uncertainty (FPU) on job searches and labour demand in the United States. We first develop search-based job search indices and find that increased FPU leads to lower job search levels. At the same time, when FPU rises, labour demand is also reduced. The effect of FPU varies across different regions and is also affected by the prevailing monetary policy stance and the level of government debt. Labour market institutions can help explain these differences. Lastly, FPU reduces matching efficiency in labour markets. These results are robust to alternative specifications, the consideration of the effect of uncertainty from risk, and the endogeneity problem.