distinguish the goods and the employment compensation components of government consumption in assessing the effects of fiscal … particular, the model with government employment does a good job at accounting for the dynamic response of private consumption to … a fiscal policy shock. Government employment compensation acts as a transfer payment for households, thereby mitigating …

The share of employment in manufacturing as well as the relative price of manufactures has declined sharply over the … unable to account for the entire decline in employment over this period, we expand the model to allow for manufactured … explain the decline in relative employment in the 1990s. However, larger errors in the 1970s remain unexplained. …