Selective Use of Discretionary Public Employment and Economic Flexibility
Levy Economics Institute Working Paper No. 218
28 Pages Posted: 5 Jun 1998
Date Written: 1997
Full employment is normally associated with structural rigidities that may result in production bottlenecks and inflationary pressures. Flexibility or elasticity of the production system is therefore a desirable feature of an economic system. Many standard models, however, exhibit flexibility because of the use of unacceptably unrealistic assumptions. While unemployment and excess capacity are important real-life factors that endow economic systems with flexibility, the flexibility gained in this manner comes at a high social and economic cost. This paper explores these issues and proposes the selective use of discretionary public employment as a means of promoting higher levels of employment--and even full employment--without creating structural rigidities, resulting in negative environmental consequences, or causing undesirable geographic dislocation of workers.
JEL Classification: E62
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