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    Optimal public sector wages

    Gomes, Pedro (2014) Optimal public sector wages. The Economic Journal 125 (587), pp. 1425-1451. ISSN 0013-0133.

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    I build a dynamic stochastic general equilibrium model with search and matching frictions in order to determine the optimal public sector wage policy. Public sector wages are crucial to achieve efficient allocation of jobs. High wages induce too many unemployed to queue for public sector jobs, in turn raising unemployment. The optimal wage depends on the frictions in the two sectors. Following technology shocks, public sector wages should be procyclical, and deviations from the optimal policy significantly increase the volatility of unemployment.


    Item Type: Article
    Additional Information: This is the peer reviewed version of the article, which has been published in final form at the link above. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
    Keyword(s) / Subject(s): Public sector employment, public sector wages, unemployment, optimal policy
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Pedro Gomes
    Date Deposited: 12 Oct 2017 09:23
    Last Modified: 02 Aug 2023 17:36


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