Motivated by the high public employment, and the public wage premia observed in Europe, a Real-Business-Cycle model, calibrated to German data (1970-2007), is set up with a richer government spending side, and an endogenous private-public sector labor choice. To illustrate the effects of fiscal...

For the last few decades, monetary policy has been geared toward raising the unemployment rate as a means of achieving stable prices. However, it is possible to have stable prices as well as full employment, via a federal public service employment (PSE) program that provides jobs for those...