-seeking behavior of government bureaucrats and the public sector wage bill, which is taken to represent the rent component. In …-2007. The main findings are: (i) Due to the existence of a significant pub- lic sector wage premium and the high public sector … smaller relative to the exogenous policy case, as the government chooses a higher public wage premium, but sets a much lower …

Motivated by the high public employment, and the public wage premia observed in Europe, a Real-Business-Cycle model …, substitutes labor for capital in the input mix for public services produc- tion, and private output; (v) Government wage bill is …