How the current rise in the ratio of non-regular employment in Japan affects the effectiveness of fiscal policy is analyzed in this study. Specifically, two groups based on the ratio of non-regular employment were extracted from Japanese prefecture panel data, the fiscal multiplier for each group estimated, and the results compared. The first method is based on a regression equation consisting of cumulative growth rates using a twostage least squares (2SLS) method with Bartik-type instrumental variables (IV) to estimate the cumulative fiscal multiplier. The second method estimates the impulse response using a panel vector autoregression (VAR) model, and then estimates the fiscal multiplier and cumulative fiscal multiplier. Using both methods, it was found that the fiscal multiplier was higher in prefectures with a high ratio of non-regular employment than in those with a low ratio. Non-regular employees in Japan tend to have relatively low wages, suggesting that they have the characteristics of non-Ricardian households, which tend to live hand-to-mouth.
MATSUMURA et al. (Tue,) studied this question.
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