Cyclical and welfare effects of public sector unions in a Real-Business-Cycle model

Aleksandar Vasilev

Working Papers from Business School - Economics, University of Glasgow

Abstract: Motivated by the highly-unionized public sectors, the high public shares in total em- ployment, and the public sector wage premia observed in Europe, this paper examines the importance of public sector unions for macroeconomic theory. The model gen- erates cyclical behavior in hours and wages that is consistent with data behavior in an economy with highly-unionized public sector, namely Germany during the period 1970-2007. The union model is a significant improvement over a model with exogenous public employment. In addition, endogenously-determined public wage and hours add to the distortionary effect of contractionary tax reforms by generating greater tax rate changes, thus producing significantly higher welfare losses.

Keywords: fiscal policy; public wages; public employment; public sector labor unions (search for similar items in EconPapers)
JEL-codes: C68 E62 J45 J51 (search for similar items in EconPapers)
Date: 2013-08
New Economics Papers: this item is included in nep-dge, nep-nps and nep-pbe
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Related works:
Working Paper: Cyclical and Welfare Effects of Public Sector Unions in a Real-Business-Cycle Model (2013)
Working Paper: Cyclical and welfare effects of public sector unions in a Real-Business-Cycle model (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2013_19

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