Fiscal policy in a dsge model with endogenous public wages and hours

Vasilev, Aleksander (2016) Fiscal policy in a dsge model with endogenous public wages and hours. Lambert Academic Publishing. ISBN 3659677086, 978-3659677083

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Item Status:Live Archive

Abstract

Motivated by the high public employment, and the public sector wage premia observed in Europe, a Real-Business-Cycle model, calibrated to German data (1970-2007), is set up with an endogenous private-public sector labor choice. The latter is achieved by the inclusion of a convex transaction cost of government work, generating a wedge between the marginal disutility of an hour worked in the public and private sectors, which is consistent with the evidence. This friction also helps the model framework to accommodate the different wage rates in the two labor markets. The interaction between the two labor markets is shown to be quantitatively important for both the short-run model dynamics, as well as for the long-run behavior of the economy.

Keywords:DSGE models, fiscal policy, public-sector wages, public-sector hours
Subjects:L Social studies > L130 Macroeconomics
N Business and Administrative studies > N330 Taxation
L Social studies > L231 Public Administration
L Social studies > L113 Economic Policy
L Social studies > L140 Econometrics
Divisions:Lincoln International Business School
ID Code:33240
Deposited On:23 Oct 2018 09:30

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