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Public employment and labor market performances

  • Yann Algan

    ()

    (FRJ - Fédération de recherche Jourdan - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CEPREMAP - Centre pour la recherche économique et ses applications - École des Ponts ParisTech (ENPC))

  • Pierre Cahuc

    (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique)

  • André Zylberberg

    ()

    (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

This paper deals with the consequence of public employment on labor market performances in 17 OECD countries over the period 1960-2000. It is argued that public employment had an important crowding out e¤ect on the private sector and increased the unemployment rate over this period. More precisely, empirical evidence suggests that the creation of one public job destroyed about 1.5 private job, sightly decreased participation to the labor market and eventually increased the number of unemployed workers by 0:3: Theoretical considerations and empirical evidence also suggest that the crowding out effect of public jobs on private jobs is more important in countries in which public production ishighly substitutable to private activities and in which the public sector provides high rents.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00256207.

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Date of creation: Apr 2002
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Publication status: Published in Economic Policy, Oxford University Press (OUP), 2002, pp.1-65
Handle: RePEc:hal:cesptp:halshs-00256207
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00256207
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  1. Albert Ma, C.T. & Weiss, A.M., 1991. "A Signaling Theory of Unemployment," Papers 7, Boston University - Department of Economics.
  2. Michèle Belot & Jan C. van Ours, 2004. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labor market reforms?," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 621-642, October.
  3. Richard Layard & Stephen Nickell, 1992. "Unemployment in the OECD Countries," CEP Discussion Papers dp0081, Centre for Economic Performance, LSE.
  4. Sherwin Rosen, 1995. "Public Employment, Taxes and the Welfare State in Sweden," University of Chicago - George G. Stigler Center for Study of Economy and State 106, Chicago - Center for Study of Economy and State.
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  9. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, March.
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  13. Albert Alesina & Stephan Danninger & Massimo Rostagno, 2001. "Redistribution Through Public Employment: The Case of Italy," IMF Staff Papers, Palgrave Macmillan, vol. 48(3), pages 2.
  14. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1127-1161.
  15. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  16. Demekas, Dimitri G & Kontolemis, Zenon G, 2000. " Government Employment and Wages and Labour Market Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(3), pages 391-415, July.
  17. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  18. Georgios Karras, 2000. "Private and Government Employment in the OECD: Productivities and Wages," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 29(2), pages 267-279, 07.
  19. Richard B. Freeman, 2000. "Single Peaked Vs. Diversified Capitalism: The Relation Between Economic Institutions and Outcomes," NBER Working Papers 7556, National Bureau of Economic Research, Inc.
  20. Tirole, J., 1993. "The Internal Organization of Government," Working papers 93-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  21. Holmlund, Bertil, 1997. "Macroeconomic Implications of Cash Limits in the Public Sector," Economica, London School of Economics and Political Science, vol. 64(253), pages 49-62, February.
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