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Interactions between private and public sector wages

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  • Afonso, António
  • Gomes, Pedro

Abstract

We examine the interactions between public and private sector wages per employee in OECD countries. The growth of public sector wages and of public sector employment positively affects the growth of private sector wages. Moreover, total factor productivity, the unemployment rate and the degree of urbanisation are also important determinants of private sector wage growth. With respect to public sector wage growth, we find that it is influenced by fiscal conditions in addition to private sector wages. We then set up a dynamic labour market equilibrium model with two sectors, search and matching frictions and exogenous growth to understand the transmission mechanisms of fiscal policy. The model is quantitative consistent with the main estimation findings.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 39 (2014)
Issue (Month): PA ()
Pages: 97-112

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Handle: RePEc:eee:jmacro:v:39:y:2014:i:pa:p:97-112

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Web page: http://www.elsevier.com/locate/inca/622617

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Keywords: Public sector wages; Private sector wages; Employment; Fiscal policy;

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References

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Citations

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Cited by:
  1. Afonso, António & Gomes, Pedro, 2014. "Interactions between private and public sector wages," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 97-112.
  2. Gonzalo Fernández-de-Córdoba & Javier Pérez & José Torres, 2012. "Public and private sector wages interactions in a general equilibrium model," Public Choice, Springer, vol. 150(1), pages 309-326, January.
  3. T. Buyse & F. Heylen, 2012. "Leaving the empirical (battle)ground: Output and welfare effects of fiscal consolidation in general equilibrium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/826, Ghent University, Faculty of Economics and Business Administration.
  4. Javier J. Pérez & A. Jesús Sánchez, 2009. "Is there a signalling role for public wages? Evidence for the euro area based on macro data," Banco de Espa�a Working Papers 0934, Banco de Espa�a.
  5. Gonzalo F De córdoba & Javier J Pérez & José L Torres, 2012. "On the substitutability between public and private employment," Economics Bulletin, AccessEcon, vol. 32(3), pages 2700-2709.
  6. Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2012. "Public or Private Sector Wage Leadership? An International Perspective," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 228-244, 03.
  7. Stähler, Nikolai & Thomas, Carlos, 2011. "FiMod - a DSGE model for fiscal policy simulations," Discussion Paper Series 1: Economic Studies 2011,06, Deutsche Bundesbank, Research Centre.

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