Public Wages, Public Employment, and Business Cycle Volatility: Evidence from U.S. Metro Areas

Arbeitspapier

Based on data from a cross section of U.S. metro areas, we show that public employment correlates negatively with business cycle volatility, hinting at a stabilizing effect of public employment, while public wages correlate weakly and positively with business cycle volatility, hinting at a destabilizing effect of public wages. To explain these relationships, we set up a search and matching model that contains a government sector and a role for government spending in product markets. This latter mechanism affects how the outside option behaves, and this mechanism can help a search and matching model to generate wage-reducing and stabilizing effects of public employment. Without this mechanism, a search and matching model cannot generate these effects.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 9965

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy ; Labor Force and Employment, Size, and Structure
• Subject: public employment ; public wages ; business cycle volatility ; crowding out ; search and matching

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boeing-Reicher, Claire A. ; Caponi, Vincenzo
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/142404
• Last update: 10.03.2025, 11:43 AM CET