Government Employment and Wages and Labour Market Performance

Oxford Bulletin of Economics & Statistics, Vol. 62, Issue 3, July 2000

Posted: 14 Jun 2001

See all articles by Dimitri G. Demekas

Dimitri G. Demekas

School of Public Policy, LSE; International Finance Corporation, World Bank Group

Zenon G. Kontolemis

European Union - European Commission

Abstract

Government wage, benefit, and employment decisions are not taken on a profit-maximizing basis, and have a substantial impact on aggregate labour market performance and unemployment. In a two-sector labour market model with free mobility of labour, 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 labour market performance.

Suggested Citation

Demekas, Dimitri G. and Kontolemis, Zenon G., Government Employment and Wages and Labour Market Performance . Oxford Bulletin of Economics & Statistics, Vol. 62, Issue 3, July 2000, Available at SSRN: https://ssrn.com/abstract=239251

Dimitri G. Demekas (Contact Author)

School of Public Policy, LSE ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

International Finance Corporation, World Bank Group

1818 H Street NW
Washington, DC 20433
United States

Zenon G. Kontolemis

European Union - European Commission ( email )

Belgium

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