This paper analyses the optimal stabilization policy when growth is driven by learning by doing. If benefits of learning by doing are not fully internalized, the optimal policy is to tax labor during expansions and to subsidize it during recessions. The long-term impact of this policy depends...

The federal government widely promoted the American Recovery and Reinvestment Act(ARRA), more commonly called the “stimulus package,” as a means to help states balance theirbudgets for the 2010 fiscal year amid decreasing tax revenues. The ARRA allocated $140 billion to help states' budgets...

The recent crisis in the United States has often been associated with substantial amounts of policy uncertainty. In this paper we ask how uncertainty about fiscal policy affects the impact of fiscal policy changes on the economy when the government tries to counteract a deep recession. The...