The cyclicality of consumption, wages and employment of the public sector in the euro area

Ana Lamo (), Javier J. Pérez García () and Ludger Schuknecht ()

No 757, Working Paper Series from European Central Bank

Abstract: This study examines the business cycle behaviour of public consumption and its main components; the public wage bill (including compensation per employee and public employment)and intermediate consumption in the euro area aggregate, euro area countries and a group of selected non-euro area OECD countries (Denmark, Sweden, the UK, Japan and the US). It looks across a large number of variables and methods, using annual data from 1960 to 2005. It finds robust evidence supporting that public consumption, wages and employment co-move with the business cycle in a pro-cyclical manner with 1-2 year lags, notably for the euro area aggregate and euro area countries. The findings reflect mainly the correlation between cyclical developments (automatic stabilizers), but also point to the important role of pro-cyclical discretionary fiscal policies. JEL Classification: E62, E63, H50.

Keywords: Public consumption; public wages; public employment; stylized facts; filtering; thick modelling. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-lab, nep-mac and nep-pbe
Date: 2007-05
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