a4175583-800d-4571-b324-797c357c5bc6_08rt26-delivering-public-investment-efficiently-_conefrey-lozej-o_reilly-and-walsh_.pdf_sfvrsn_52df701a_3-artifacted.pdf — PaddleOCR-VL (Baidu)

TABLE 7. Calibration of the labour market

	Home	REA	US	RW
Inverse of the Frisch elasticity of labour supply ζ	2.00	2.00	2.00	2.00
Matching probability, Ricardian workers, (piW)	0.3021	0.2238	0.5292	0.3442
Matching probability, HtM workers, (pjW)	0.2090	0.1848	0.5385	0.2598
Matching probability, firms, (psF)	0.70	0.70	0.70	0.70
Matching efficiency, Ric. w., (φi,M)	0.4598	0.3958	0.6086	0.4908
Matching efficiency, HtM w., (φj,M)	0.3825	0.3596	0.6139	0.4264
Vac. posting cost, Ric. w., (Ψi)	0.6984	0.3336	0.3126	0.3715
Vac. posting cost, HtM w., (Ψj)	0.2373	0.1953	0.1384	0.2630
Break-up rate, Ric. w., (δx,i)	0.0140	0.0226	0.0271	0.0221
Break-up rate, HtM w., (δx,j)	0.0339	0.0276	0.0516	0.0259
Disutility of labour, Ric. w., (χi)	1.0270	0.6101	0.5838	0.6677
Disutility of labour, HtM w., (χj)	1.2732	1.3434	1.3845	1.2745
Matching elasticity, Ric. w., (μi)	0.50	0.50	0.50	0.50
Matching elasticity, HtM w., (μj)	0.50	0.50	0.50	0.50
Bargaining power η	0.50	0.50	0.50	0.50
Replacement ratio, Ric. w., (rrati)	0.470	0.525	0.463	0.495
Replacement ratio, HtM w., (rratj)	0.597	0.551	0.542	0.542
Unemployment rate, (un)	0.0696	0.1038	0.0605	0.0694
Unemployment rate, HtM w., (unj)	0.1437	0.1334	0.0918	0.0930
Prob. to renegotiate existing wage, Ric. w., (ξw,i)	0.8879	0.8879	0.8879	0.8879
Prob. to renegotiate existing wage, HtM w., (ξw,j)	0.8879	0.8879	0.8879	0.8879
Prob. to start job at avg. wage, Ric. w., (κw,i)	0.8879	0.8879	0.8879	0.8879
Prob. to start job at avg. wage, HtM w., (κw,j)	0.8879	0.8879	0.8879	0.8879

Note: REA=Rest of the euro area; US=United States; RW=Rest of world

4 Simulation design and results

To analyse the effects of delays in the delivery of public investment, we simulate a gradual, but permanent debt-financed increase in public investment. To clearly separate the effects of different types of delays, we simulate the increase in public investment without any delays, and then compare this with 2- and 5-year planning delays (time-to-plan). We then repeat the same simulation, but with 2- and 5-year construction delays (time-to-build).12 We conduct the same set of simulations across two models, first in the model without search frictions on the labour market, and second in the otherwise identical model, except that this time the standard labour market is replaced by search frictions.13

It is important to clarify in detail the information structure of the experiments conducted. Before the announcement, the economy is in the steady state, and the

12Note that while the model has a steady-state 2% inflation, we assume that government investment spending is in real terms, as this allows us to compare shocks of the same size across time. In all cases we assume the government borrows when it invests, i.e., there is no front-loading in government borrowing.

13See Appendix A and Appendix B for details of the models.