In an attempt to mitigate the negative effects of partisan hiring, many governments around world have adopted meritocratic hiring public employees. This paper shows that government can unintended consequences on macroeconomic aggregates. countries, employees enjoy considerable job security and generous compensation schemes; as a result, talented workers choose work for sector, which deprives pr...

The responsiveness of job creation to shocks is procyclical, while the destruction countercyclical. This new finding can be explained by a heterogeneous-firm model in which hiring costs lead lumpy employment adjustment. predicts that policies aim stimulate encouraging creation, such as subsidies, are significantly less effective recessions: these times when few firms near their thresholds and m...