Government Employment and Wages and Labor Market Performance

Download or read book Government Employment and Wages and Labor Market Performance written by Mr.Dimitri G. Demekas and published by International Monetary Fund. This book was released on 1999-04-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.