The Relationship Between Fiscal Spending and Unemployment
The problem of sustaining full employment levels has gained importance, given that as of late 2011, America's unemployment was at around 14 million individuals. Grounded across current and classical labor theories, the purpose of this research was to further the understanding of how full employment levels may be sustained by changes in economic policy. The research employed a predictive modeling design that examined the associations linking infrastructure spending, defense spending, net government budget savings, gross private domestic investment (GPI), consumer price index (CPI), money supply (M2) and a refined measure of defense spending with unemployment. Archival data, spanning the 17 year period from 1960 to 1976, was drawn from 5 databases to build and assess 3 predictive models. The primary step of the regression analysis indicated that defense spending, net government budget savings, and GPI as a percentage of GDP individually had significant statistical influences on unemployment rates. Additional analysis indicated the dummy variables of CPI, M2, and a refined measure of defense spending had no statistically significant effect on the unemployment rate. The final model, based upon the regression model data, was used to effectively predict expected changes in employment given changes in various economic variables. The research contributes to positive social change by helping to establish economic policy designed to increase the employment opportunities available for those persons who desire to enter the labor market, and thus benefit the 14 million individuals currently displaced from our society's labor force.
0509: Economic history