Are Recessions Good for Government Hires? The Effect of Unemployment on Public Sector Human Capital

Abstract

Utilizing a large dataset of U.S. federal government employees covering 24 years, we estimate and analyze the persistent wage effect of entering government employment during recessions for recent college graduates and other new employees. Contrary to previous results in the literature for private sector employees, we document a significant and long-term wage increase for federal civil servants who enter government service in recessions. We show this result is robust to alternative samples and model specifications. We conclude by examining agency occupation composition and job matching as mechanisms for these results.

Keywords: Public Sector Labor Markets, Wages, Public Administration

JEL Classification: J45, J31, H83 ,K0