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Government Employment and Wages and Labor Market Performance


Dimitri G. Demekas


International Monetary Fund (IMF)

Zenon G. Kontolemis


International Monetary Fund (IMF)

April 1999

IMF Working Paper No. 99/55

Abstract:     
Government wage, benefit, and employment decisions are not taken on a profit-maximizing basis and have a substantial impact on aggregate labor market performance and unemployment. In a two-sector labor market model with free mobility of labor, an increase in government wages or benefits reduces private sector employment, and government employment is not an effective counter-cyclical instrument. Empirical tests for Greece confirm that the expansion of the public sector in the 1980s contributed to the deterioration of labor market performance.

Number of Pages in PDF File: 29

Keywords: Unemployment, wage differentials, public sector labor markets

JEL Classification: D72, H31, J31, J45, J64

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Date posted: February 13, 2006  

Suggested Citation

Demekas, Dimitri G. and Kontolemis, Zenon G., Government Employment and Wages and Labor Market Performance (April 1999). IMF Working Paper, Vol. , pp. 1-29, 1999. Available at SSRN: http://ssrn.com/abstract=880582

Contact Information

Dimitri G. Demekas (Contact Author)
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
Zenon G. Kontolemis
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
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