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On the substitutability between public and private employment

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  • Gonzalo F De córdoba

    ()
    (Universidad de Málaga)

  • Javier J Pérez

    ()
    (Bank of Spain)

  • José L Torres

    ()
    (Universidad de Málaga)

Abstract

In this note we provide empirical evidence that shows that there seems to be a high degree of substitutability between public and private employment. We estimate an aggregated production function with a CES specification over labor inputs both public and private. Under the assumption that private and public workers are paid their marginal products, we obtain an equation that relates wages' ratios with employment ratios. By estimating that expression for a number of OECD countries we find that for most countries this simple model can explain strikingly well the dynamics of the observed relationship between private and public labor sectors.

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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 3 ()
Pages: 2700-2709

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Handle: RePEc:ebl:ecbull:eb-12-00329

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Keywords: Public wages; public employment; labor market;

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References

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  1. Ardagna, Silvia, 2007. "Fiscal Policy in Unionized Labor Markets," Scholarly Articles 2580048, Harvard University Department of Economics.
  2. Afonso, António & Gomes, Pedro, 2014. "Interactions between private and public sector wages," Journal of Macroeconomics, Elsevier, Elsevier, vol. 39(PA), pages 97-112.
  3. Zenon Kontolemis G. & Dimitri G. Demekas, 1999. "Government Employment and Wages and Labor Market Performance," IMF Working Papers, International Monetary Fund 99/55, International Monetary Fund.
  4. Gonzalo Fernández-de-Córdoba & Javier J. Pérez & José L. Torres, 2009. "Public and private sector wages interactions in a general equilibrium model," Banco de Espa�a Working Papers, Banco de Espa�a 0924, Banco de Espa�a.
  5. Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2008. "Public and private sector wages:comovement and casuality," Economic Working Papers at Centro de Estudios Andaluces, Centro de Estudios Andaluces E2008/14, Centro de Estudios Andaluces.
  6. Ardagna, Silvia, 2007. "Fiscal policy in unionized labor markets," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(5), pages 1498-1534, May.
  7. Keith A. Bender, 2003. "Examining Equality between Public- and Private-Sector Wage Distributions," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 41(1), pages 62-79, January.
  8. Ishida, Junichiro & Matsushima, Noriaki, 2009. "Should civil servants be restricted in wage bargaining? A mixed-duopoly approach," Journal of Public Economics, Elsevier, Elsevier, vol. 93(3-4), pages 634-646, April.
  9. Bender, Keith A, 1998. " The Central Government-Private Sector Wage Differential," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 12(2), pages 177-220, April.
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Cited by:
  1. Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2013. "Are government wages interlinked with private sector wages?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 35(5), pages 697-712.

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