Premium
PUBLIC ENTERPRISES AND LABOR MARKET PERFORMANCE *
Author(s) -
Hörner Johannes,
Ngai L. Rachel,
Olivetti Claudia
Publication year - 2007
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2007.00431.x
Subject(s) - unemployment , economics , public sector , labour economics , control (management) , aggregate (composite) , macroeconomics , economy , materials science , management , composite material
This article shows that state control of some industries may have contributed to the increase in European unemployment from the 1970s to the early 1990s. We develop a simple two‐sector model, one privately run and one publicly run, that has risk‐averse workers directing their search into one of the sectors. Assuming that the privately run sector is less able to insure its employees against uncertainty, we show that aggregate unemployment in this economy increases in response to an increase in economic turbulence.