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Public jobs creation and unemployment dynamics

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  • Céline Choulet

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

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    Abstract

    This paper raises the question of the dynamic effects of public spending in jobs on labor market performance. We use a dynamic matching model and study how public jobs creation affects endogenous workers' decisions to move on the labor market and private-sector firms' job creation and destruction decisions. We obtain that it exerts an attracting effect and a fiscal effect on the labor market that make the unemployment rate and job flows overshoot. As an empirical illustration, we estimate a SVAR model that focuses on the consequences of public job creations on unemployment, wages and job flows dynamics. We confirm our intuition : public employment has a significant ambiguous effect on private wages.

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    Bibliographic Info

    Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00113357.

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    Date of creation: Mar 2006
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    Handle: RePEc:hal:cesptp:halshs-00113357

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    Related research

    Keywords: Public sector labor market; unemployment dynamics.;

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    1. Blanchard, Olivier Jean & Quah, Danny, 1993. "The Dynamic Effects of Aggregate Demand and Supply Disturbances: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 653-58, June.
    2. Zenon Kontolemis G. & Dimitri G. Demekas, 1999. "Government Employment and Wages and Labor Market Performance," IMF Working Papers 99/55, International Monetary Fund.
    3. Steven J. Davis & John Haltiwanger, 1996. "On the Driving Forces Behind Cyclical Movement, in Employment and Job Reallocation," NBER Working Papers 5775, National Bureau of Economic Research, Inc.
    4. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
    5. Olivier Jean Blanchard & Danny Quah, 1988. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," NBER Working Papers 2737, National Bureau of Economic Research, Inc.
    6. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 12(2-3), pages 231-254.
    7. repec:hal:journl:halshs-00256207 is not listed on IDEAS
    8. Holmlund, Bertil, 1997. "Macroeconomic Implications of Cash Limits in the Public Sector," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 64(253), pages 49-62, February.
    9. Jim Malley & Thomas Moutos, . "Government Employment and Unemployment: With One Hand Giveth, The Other Taketh," Working Papers, Business School - Economics, University of Glasgow 9709, Business School - Economics, University of Glasgow, revised May 1998.
    10. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
    11. Steven J. Davis & John Haltiwanger, 1990. "Gross Job Creation and Destruction: Microeconomic Evidence and Macroeconomic Implications," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 123-186 National Bureau of Economic Research, Inc.
    12. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
    13. Yann Algan & Pierre Cahuc & André Zylberberg, 2002. "Public employment and labor market performances," Working Papers 250928, Institut National de la Recherche Agronomique, France.
    14. Blanchard, Olivier Jean, 1989. "A Traditional Interpretation of Macroeconomic Fluctuations," American Economic Review, American Economic Association, American Economic Association, vol. 79(5), pages 1146-64, December.
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