The Keynesian multiplier and the Pigou effect under substitution between private and public consumption

In this paper we present a fixprice model in which private and public consumption show some degree of substitution. We offer formulae for the Keynesian multiplier which depend on this degree of substitution. We also show that there is a Pigou effect and that, sometimes, this effect is larger than the Keynesian multiplier.Keynes, Multiplier, Unemployment, Pigou

The Long-Run Keynesian Multiplier

We study the impact of investment on employment. In the short-run an increase in investment stimulates employment (this is the standard Keynesian multiplier). However increases of investment translate into increases in the capital stock. If labor and capital are substitutes (resp. complements), an increase in investment today decreases (resp. increases) employment tomorrow. We provide a formula to measure the overall effect of an increase in investment on emplyment, assuming that certain regularities hold.Disequilibrium