van der Ploeg, Frederick - C.E.P.R. Discussion Papers - 2005
than a lump-sum subsidy, both cutting public employment and cutting public spending on market goods induce an investment … market goods induces a lower interest rate, a higher wage, a lower capital stock and a fall in employment. Cutting public … employment or the labour income tax rate leads, in contrast, to a lower wage, a higher interest rate and a higher capital stock …