Uncertainty Shocks, Structural Unemployment and Employment Stability Policies: Based on a Directed Searching and Matching Model with Public and Entrepresis Sectors
LIN Bin, SUN Qian, WANG Dihai
School of International Business, Shanghai University of International Business and Economics; School of Economics, Fudan University
Summary:
In recent years, high unemployment rate, particularly among the youth, has drawn widespread societal attention in China. China's economy has long exhibited a dual labor market structure segmented between the public and private sectors. The stability and higher wages of public sector jobs have fostered a strong preference for public employment, making it a crucial mechanism for workers to hedge against market uncertainties. With rising economic uncertainty, labor market choices—especially among university graduates—have shifted increasingly toward public sector jobs, fueling social phenomena such as “Civil Service Exam Craze”, “Public Institution Exam Craze”, and “Teaching Certification Craze”. In response to this severe employment situation, the central government has implemented various employment stabilization policies, focusing on fiscal measures to secure job opportunities, particularly for young workers. However, it remains unclear whether these policies can effectively mitigate preference for public employment, reduce structural unemployment, and enhance fiscal efficiency. To address these questions, this paper conducts an in-depth empirical and theoretical analysis to explore how uncertainty shocks distort labor market allocation, generate structural unemployment, and amplify macroeconomic fluctuations. Furthermore, we develop and quantitatively evaluate various types of simple rule-based employment stabilization policies from the perspectives of economic cycles, welfare costs, and government expenditure multipliers. Empirical evidence suggests that the primary reasons for the preference for public sector jobs are their stability and higher wages. However, the limited supply of public sector vacancies increases the likelihood of unemployment among those pursuing such positions. Empirical analysis, which matches city-level uncertainty indicators with individual-level labor data, shows that higher economic uncertainty strengthens the preference for public sector employment, thereby exacerbating the overall unemployment rate. Based on the dual segmentation of the public and private labor sectors, this paper constructs a two-sector directed search and matching New Keynesian Dynamic Stochastic General Equilibrium (NK-DSGE) model. Theoretical and numerical simulations reveal that, on the one hand, uncertainty shocks reduce aggregate demand, decrease job supply and wages in the private sector, and thereby generate cyclical unemployment. On the other hand, the relative stability of public sector wages and vacancies attracts more job seekers into the public sector labor market, distorting labor market allocation and generating structural unemployment. It further increases the overall unemployment rate and amplifies economic fluctuations. Impulse response analysis shows that structural unemployment accounts for nearly 40% of the total unemployment effect induced by uncertainty shocks. The evaluation of simple rule-based employment stabilization policies suggests that a pro-cyclical public sector wage policy can effectively balance employment stabilization with fiscal efficiency in the face of uncertainty shocks. On the one hand, the pro-cyclical public wage policy requires public sector wages to decrease in tandem with private sector wages, preventing excessive labor congestion in the public sector and reducing structural unemployment. On the other hand, this policy optimizes labor market allocation, curbing the overexpansion of public sector employment and fiscal expenditure, reducing the crowding-out effect on private sector labor, and contributing to macroeconomic and fiscal rebalancing. The marginal contributions of this paper are threefold. First, it develops a directed search and matching NK-DSGE model incorporating both public and private sectors, based on empirical evidence, to investigate the transmission mechanism through which uncertainty shocks generate structural unemployment. The model is calibrated using real economic data from China to evaluates the effectiveness of employment stabilization policies. Second, it explains how uncertainty shocks generate structural unemployment and amplify economic fluctuations through the dual labor market structure, offering a novel theoretical amplification mechanism not previously explored in the literature. Third, this study enriches the literature by analyzing employment stabilization policies from multiple perspectives, including economic cycles, welfare costs, and government expenditure multipliers, moving beyond the traditional focus on job creation alone. Given the relatively underdeveloped social security system in China, the public sector remains a vital mechanism for workers to hedge against uncertainties. To address the structural unemployment caused by uncertainty shocks, particularly among young people, the government should adopt more proactive employment stabilization policies. First, the pro-cyclical public wage policy can help narrow the income and welfare gap between the public and private sectors, alleviating the preference for public sector employment and reducing structural unemployment. Second, while moderately expanding public sector job supply, it is crucial to establish a rational exit mechanism to break the entrenched perception of the “iron rice bowl” (lifelong secure employment). Lastly, a more comprehensive social security system should be developed to expand the coverage of the “five insurances and one fund” in the private sector, thereby mitigating the impact of uncertainty shocks on household income.
林滨, 孙乾, 王弟海. 不确定性冲击、结构性失业与稳就业政策——基于公共—企业两部门定向搜寻匹配模型的研究[J]. 金融研究, 2024, 533(11): 1-19.
LIN Bin, SUN Qian, WANG Dihai. Uncertainty Shocks, Structural Unemployment and Employment Stability Policies: Based on a Directed Searching and Matching Model with Public and Entrepresis Sectors. Journal of Financial Research, 2024, 533(11): 1-19.
[1]陈诗一和陈登科,2019,《经济周期视角下的中国财政支出乘数研究》,《中国社会科学》第8期,第111～129页。 [2]何超和韩晗,2024,《搜寻匹配理论的发展和在宏观经济学中的应用》,《经济学(季刊)》第1期,第1～16页。 [3]李静和楠玉,2019,《人才为何流向公共部门——减速期经济稳增长困境及人力资本错配含义》,《财贸经济》第2期,第20～33页。 [4]李明、张璿璿和郑礼明,2023,《中国就业岗位创造的财政成本评估》,《金融研究》第7期,第57～76页。 [5]李世刚和尹恒,2017,《政府—企业间人才配置与经济增长——基于中国地级市数据的经验研究》,《经济研究》第4期,第78～91页。 [6]王弟海、陈理子和张晏,2017,《我国教育水平提高对经济增长的贡献——兼论公共部门工资溢价对我国教育回报率的影响》,《财贸经济》第9期,第129～145页。 [7]王曦、汪玲、彭玉磊和宋晓飞,2017,《中国货币政策规则的比较分析——基于DSGE模型的三规则视角》,《经济研究》第9期,第24～38页。 [8]王义中、郑博文和邬介然,2023,《不确定性冲击、信贷资源错配与货币财政政策效果》,《世界经济》第2期,第3～30页。 [9]王钰冰、郭凯明和龚六堂,2024,《结构性就业矛盾、劳动时间配置与人工智能技术革命》,《金融研究》第1期,第1～18页。 [10]许志伟和刘建丰,2019,《收入不确定性、资产配置与货币政策选择》,《经济研究》第5期,第30～46页。 [11]尹志超和甘犁,2009,《公共部门和非公共部门工资差异的实证研究》,《经济研究》第4期,第129～140页。 [12]余泳泽,2017,《异质性视角下中国省际全要素生产率再估算:1978—2012》,《经济学(季刊)》第3期,第1051～1072页。 [13]张晓娣,2016,《公共部门就业对宏观经济稳定的影响——基于搜索匹配模型的DSGE模拟与预测》,《中国工业经济》第4期,第39～56页。 [14]周扬和谢宇,2019,《二元分割体制下城镇劳动力市场中的工作流动及其收入效应》,《社会》第4期,第186～209页。 [15]朱南苗、赵绍阳和邓国营,2011,《公共部门工资溢价的重新审视——基于家庭消费数据的调整》,《数量经济技术经济研究》第3期,第51～65页。 [16]Baker,S., N.Bloom,S. Davis and S. Terry,2020, “COVID-Induced Economic Uncertainty”, NBER Working Paper, No.26983. [17]Basu, S. and B. Bundick, 2017, “Uncertainty Shocks in a Model of Effective Demand”, Econometrica,85(3), pp.937～958. [18]Bloom, N., 2009, “The Impact of Uncertainty Shocks”, Econometrica, 77(3), pp.623～685. [19]Born, B. and J.Pfeifer,2021, “Uncertainty‐driven Business Cycles: Assessing the Markup Channel”, Quantitative Economics, 12(2), pp.587～623. [20]Chang, C.,K. Chen, D.F.Waggoner and T. Zha, 2016, “Trends and Cycles in China's Macroeconomy”, NBER Macroeconomics Annual, 30(1), pp.1～84. [21]Chang, C., Z.Liu,M. M. Spiegel and J. Zhang, 2019, “Reserve Requirements and Optimal Chinese Stabilization Policy”, Journal of Monetary Economics, 103,pp.33～51. [22]Christiano, L. J.,R. Motto and M. Rostagno, 2014, “Risk Shocks”, American Economic Review, 104(1), pp.27～65. [23]den Haan, W. J., L. B. Freund and P. Rendahl, 2021, “Volatile Hiring: Uncertainty in Search and Matching Models”, Journal of Monetary Economics, 123, pp.1～18. [24]Feng, S.,Y. Hu and R. Moffitt,2017, “Long Run Trends in Unemployment and Labor Force Participation in Urban China”, Journal of Comparative Economics, 45(2), pp.304～324. [25]Gertler, M. and A.Trigari, 2009, “Unemployment Fluctuations with Staggered Nash Wage Bargaining”, Journal of Political Economy, 117(1), pp.38～86. [26]Gilchrist, S.,J. Sim and E. Zakrajšek,2014, “Uncertainty,Financial Frictions, and Investment Dynamics”, NBER Working Paper, No.20038. [27]Gomes, P., 2015, “Optimal Public Sector Wages”, Economic Journal, 125(587), pp.1425～1451. [28]Jurado, K.,S. C. Ludvigson and S. Ng, 2015, “Measuring Uncertainty”, American Economic Review, 105(3),pp.1177～1216. [29]Leduc, S. and Z.Liu,2016, “Uncertainty Shocks are Aggregate Demand Shocks”, Journal of Monetary Economics, 82, pp.20～35. [30]Michaillat, P., 2014, “A Theory of Countercyclical Government Multiplier”, American Economic Journal: Macroeconomics, 6(1), pp.190～217. [31]Oh, J., 2020, “The Propagation of Uncertainty Shocks: Rotemberg Versus Calvo”, International Economic Review, 61(3), pp.1097～1113. [32]Quadrini, V. and A.Trigari,2007, “Public Employment and the Business Cycle”, Scandinavian Journal of Economics, 109(4), pp.723～742. [33]Schaal, E., 2017, “Uncertainty and Unemployment”, Econometrica, 85(6), pp.1675～1721.
