Public Employment and the Business Cycle
University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)
Bocconi University - Department of Economics
Scandinavian Journal of Economics, Vol. 109, Issue 4, pp. 723-742, March 2008
We add a public employment sector to the basic search and matching model in order to study the business cycle impact of public wage and employment policies. The government is assumed to follow exogenous rules for public wages and employment calibrated to match some cyclical features of US policies. These features include a positive public wage premium and mildly procyclical public wages and employment. We find that the presence of the public sector increases the volatility of employment and output.
Number of Pages in PDF File: 20
Keywords: Job search, public employment, business cycle
JEL Classification: E6, E32, J64Accepted Paper Series
Date posted: February 29, 2008
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