A closer look at the employment effects of fiscal policy shocks: What have minorities got to do with it?

Abstract

We investigate the employment effects of fiscal policy innovations using the narrative approach for different racial/ethnic groups, and separately for recessions and expansions. Our results show that (i) overall, tax shocks have larger effects, in terms of magnitude and significance, on the unemployment rate compared to defense spending shocks, (ii.) fiscal policy shocks have varying employment effects depending on gender, racial/ethnic subgroup and the stage of the business cycle, and (iii) sector, industry and occupational segregation in labor markets by gender, race and ethnicity can explain most of the variation in responses to fiscal policy shocks. Show more