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Public Employment and the Business Cycle *
Author(s) -
Quadrini Vincenzo,
Trigari Antonella
Publication year - 2007
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2007.00517.x
Subject(s) - business cycle , wage , economics , public sector , labour economics , order (exchange) , matching (statistics) , volatility (finance) , efficiency wage , public policy , government (linguistics) , macroeconomics , finance , economic growth , economy , linguistics , statistics , philosophy , mathematics
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.