A search and matching model with a public sector

Abstract

In this thesis I study a discrete time Dynamic Stochastic General Equilibriummodel with a labor market with search and matching frictions, that constitutesof a private and a public sector, in order to study the behavior of total unem-ployment before and after the recession of 2009 in ten core European countrymembers. The model is calibrated to mimic the aggregate data in a sampleperiod from 2000 to 2015. The directed search assumption can explain the welldocumented public wage premium as a result of a shock to the private sectorproductivity but cannot explain the fact that total unemployment is actuallymuch higher in the observed sample.