BALANCED BUDGET MULTIPLIERS

This paper extends the analysis of balanced budget multipliers in the context of the standard neoclassical model by looking at the effects o f changes in public sector employment. I look at the potential for mul tiplier effects associated with changes in the level of steady-state g overn ment purchases and steady-state government employment. As is wel l known, with endogenous capital, output may increase more than one fo r one when the steady-state level of government purchases changes. Thi s is not the case when government employment increases.