The interaction between private sector and public sector labor markets: Evidence from Romania

To account for these spillovers, we extend the standard New Keynesian model

Valeriu Nalban; Andra Smădu


Scholarcy highlights

  • We find support for active labor market policies targeting primarily the private sector
  • We quantitatively assess the spillover effects originating from sectoral labor market shocks in an emerging economy
  • We allow for an active role of the government, which decides on the optimal amount of public employment, public wages and borrowing
  • The estimated structural model captures most empirical evidence: public job creation crowds out private sector employment and is contractionary, while increases in public wages lead to muted spillover effects; on the other hand, increases in both private employment and wages have sizable crowding in effects on public sector employees and are strongly expansionary
  • Most of the work related to this article was performed while both authors were economists at the National Bank of Romania
  • The views expressed in this paper are those of the authors and do not necessarily reflect the views of the National Bank of Romania, De Nederlandsche Bank, or the IMF

Need more features? Save interactive summary cards to your Scholarcy Library.