Working Paper, 2016 (with Claire A. Boeing-Reicher)  

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 stylized facts, we set up a search and matching model with public employment. We show that the model in isolation cannot explain both of these facts simultaneously. However, when we add a role for government purchases in product markets, the model can explain both of these facts.