Cyclical and welfare effects of public sector unions in a Real-Business-Cycle model
AbstractMotivated by the highly-unionized public sectors, the high public shares in total em- ployment, and the public sector wage premia observed in Europe, this paper examines the importance of public sector unions for macroeconomic theory. The model gen- erates cyclical behavior in hours and wages that is consistent with data behavior in an economy with highly-unionized public sector, namely Germany during the period 1970-2007. The union model is a significant improvement over a model with exogenous public employment. In addition, endogenously-determined public wage and hours add to the distortionary effect of contractionary tax reforms by generating greater tax rate changes, thus producing significantly higher welfare losses.
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Bibliographic InfoPaper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2013_19.
Date of creation: Aug 2013
Date of revision:
fiscal policy; public wages; public employment; public sector labor unions;
Other versions of this item:
- Vasilev, Aleksandar, 2013. "Cyclical and Welfare Effects of Public Sector Unions in a Real-Business-Cycle Model," SIRE Discussion Papers 2013-83, Scottish Institute for Research in Economics (SIRE).
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-06 (All new papers)
- NEP-DGE-2013-12-06 (Dynamic General Equilibrium)
- NEP-NPS-2013-12-06 (Nonprofit & Public Sector)
- NEP-PBE-2013-12-06 (Public Economics)
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