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Public employment and labor market performances

  • Yann Algan


    (FRJ - Fédération de recherche Jourdan - Institut national de la recherche agronomique (INRA) - EHESS - École des hautes études en sciences sociales - CEPREMAP - Centre pour la recherche économique et ses applications - ENS Paris - École normale supérieure - Paris - 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)

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
Date of revision:
Publication status: Published in Economic Policy, Oxford University Press (OUP), 2002, pp.1-65
Handle: RePEc:hal:cesptp:halshs-00256207
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  17. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  18. Holmlund, Bertil, 1993. "Wage setting in private and public sectors in a model with endogenous government behavior," European Journal of Political Economy, Elsevier, vol. 9(2), pages 149-162, May.
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