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Public Employment and the Business Cycle

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  • Vincenzo Quadrini
  • Antonella Trigari

Abstract

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.

Suggested Citation

  • Vincenzo Quadrini & Antonella Trigari, 2007. "Public Employment and the Business Cycle," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 723-742, December.
    • Handle: RePEc:bla:scandj:v:109:y:2007:i:4:p:723-742
    DOI: 10.1111/j.1467-9442.2007.00517.x
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