Government Employment and Wages and Labor Market Performance

Author/Editor:

Zenon Kontolemis ; Dimitri G Demekas

Publication Date:

April 1, 1999

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Government wage, benefit, and employment decisions are not taken on a profit-maximizing basis and have a substantial impact on aggregate labor market performance and unemployment. In a two-sector labor market model with free mobility of labor, an increase in government wages or benefits reduces private sector employment, and government employment is not an effective counter-cyclical instrument. Empirical tests for Greece confirm that the expansion of the public sector in the 1980s contributed to the deterioration of labor market performance.

Series:

Working Paper No. 99/55

Subject:

English

Publication Date:

April 1, 1999

ISBN/ISSN:

9781451847604/1018-5941

Stock No:

WPIEA0551999

Format:

Paper

Pages:

29

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