%0 Report
        %A Boeing-Reicher, Claire A.
%A Caponi, Vincenzo
        %T Public Wages, Public Employment, and Business Cycle Volatility: Evidence from U.S. Metro Areas
        %D 2016
        %8 2016 May
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 9965
        %U https://www.iza.org/publications/dp9965
        %X Based on data from a cross section of U.S. metro areas, we show that public employment correlates negatively with business cycle volatility, hinting at a stabilizing effect of public employment, while public wages correlate weakly and positively with business cycle volatility, hinting at a destabilizing effect of public wages. To explain these relationships, we set up a search and matching model that contains a government sector and a role for government spending in product markets. This latter mechanism affects how the outside option behaves, and this mechanism can help a search and matching model to generate wage-reducing and stabilizing effects of public employment. Without this mechanism, a search and matching model cannot generate these effects.
        %K search and matching
%K crowding out
%K business cycle volatility
%K public wages
%K public employment