Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154323
Authors: 
Lamo, Ana
Moral-Benito, Enrique
Pérez, Javier J.
Year of Publication: 
2016
Series/Report no.: 
ECB Working Paper 1890
Abstract: 
We empirically analyze the impact of public employment and wages' shocks on private labor market outcomes by studying if policies operate differently in periods of economic slack than in normal times. We use local projection methods and focus on the Spanish and euro area aggregate cases. We find that the degree of economic slack is key to determine: (i) if public employment crowds-out private employment, and (ii) the degree and extent of public wage influence on the private sector. In addition, we find that the specific features of the economy also count. In the case of Spain, when fiscal consolidation is implemented at times of economic distress, the contractionary effects of public employment cuts appear more damaging for the economy than those of public wage cuts, while the opposite happens for the euro area as a whole. These differences are likely to be related to specific features of the labor markets in both cases.
Subjects: 
fiscal policies
public employment
unemployment
wages
JEL: 
E62
E65
H6
C3
C82
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2017-9
Document Type: 
Working Paper

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