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Wage Bargaining and Political Strength in the Public Sector

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  • Torberg Falch
  • Bjarne Strøm

Abstract

This paper analysis the link between political strength and public sector wages using a unique matched individual-employer data set for Norwegian local governments during the period 1990-1998. The results indicate that political strength, measured in several ways, has a positive effect on wages, while administrative strength, measured by the tenure of the chief executive, has a negative effect. The positive effect of political strength is consistent with a model in which the budgetary process is a multistage game and employment is determined in an interaction with interest groups prior to the wage bargain.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-12/cesifo1_wp1629.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1629.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1629

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Keywords: public sector labor market; wage bargaining; political strength; budgetary process;

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  1. Strom, Bjarne, 1999. " Fiscal Institutions and Wage Bargaining in the Local Public Sector," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 101(1), pages 67-82, March.
  2. Potters, Jan & Sloof, Randolph, 1996. "Interest groups: A survey of empirical models that try to assess their influence," European Journal of Political Economy, Elsevier, Elsevier, vol. 12(3), pages 403-442, November.
  3. Yianos Kontopoulos & Roberto Perotti, 1999. "Government Fragmentation and Fiscal Policy Outcomes: Evidence from OECD Countries," NBER Chapters, National Bureau of Economic Research, Inc, in: Fiscal Institutions and Fiscal Performance, pages 81-102 National Bureau of Economic Research, Inc.
  4. Allers, Maarten & de Haan, Jakob & Sterks, Cees, 2001. " Partisan Influence on the Local Tax Burden in the Netherlands," Public Choice, Springer, Springer, vol. 106(3-4), pages 351-63, March.
  5. Abowd, J.M. & Kramarz, F. & Margolis, D.N., 1995. "High-Wage Workers and High-Wage Firms," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9503, Universite de Montreal, Departement de sciences economiques.
  6. Jorid Kalseth & Jørn Rattsø, 1998. "Political Control of Administrative Spending: The Case of Local Governments in Norway," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 10(1), pages 63-83, 03.
  7. Holmlund, B., 1991. "Wage Setting in Private and Public Sectors in a Model with Endogenous Government Behavior," Papers, Uppsala - Working Paper Series 1991i, Uppsala - Working Paper Series.
  8. Bosch, Nuria & Suarez-Pandiello, Javier, 1995. "Seven Hypotheses about Public Choice and Local Spending (A Test from Spanish Municipalities)," Public Finance = Finances publiques, , , vol. 50(1), pages 36-50.
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  10. Strom, Bjarne, 1995. "Envy, Fairness and Political Influence in Local Government Wage Determination: Evidence from Norway," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 62(247), pages 389-409, August.
  11. Nouriel Roubini & Jeffrey Sachs, 1989. "Government Spending and Budget Deficits in the Industrial Economies," NBER Working Papers 2919, National Bureau of Economic Research, Inc.
  12. Falch, Torberg, 2001. "Collective bargaining in the public sector and the role of budget determination," European Journal of Political Economy, Elsevier, Elsevier, vol. 17(1), pages 75-99, March.
  13. Joseph Gyourko & Joseph Tracy, 1989. "Public Sector Bargaining and the Local Budgetary Process," NBER Working Papers 2915, National Bureau of Economic Research, Inc.
  14. Barth, Erling & Bratsberg, Bernt & Naylor, Robin A. & Raaum, Oddbjørn, 2002. "Explaining Variations in Wage Curves: Theory and Evidence," Memorandum, Oslo University, Department of Economics 03/2002, Oslo University, Department of Economics.
  15. Falch, Torberg & Rattso, Jorn, 1999. "Local public choice of school spending: disaggregating the demand function for educational services," Economics of Education Review, Elsevier, Elsevier, vol. 18(3), pages 361-373, June.
  16. Babcock, Linda C & Engberg, John & Glazer, Amihai, 1997. "Wages and Employment in Public-Sector Unions," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 35(3), pages 532-43, July.
  17. Per Tovmo & Torberg Falch, 2002. "The flypaper effect and political strength," Economics of Governance, Springer, Springer, vol. 3(2), pages 153-170, 07.
  18. Torberg Falch & Bjarne Strøm, 2006. "Local flexibility in wage setting: evidence from the Norwegian local public sector," Empirical Economics, Springer, Springer, vol. 31(1), pages 113-142, March.
  19. Edwards, Linda N & Edwards, Franklin R, 1982. "Public Unions, Local Government Structure and the Compensation of Municipal Sanitation Workers," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 20(3), pages 405-25, July.
  20. Ehrenberg, Ronald G. & Goldstein, Gerald S., 1975. "A model of public sector wage determination," Journal of Urban Economics, Elsevier, vol. 2(3), pages 223-245, July.
  21. Goux, Dominique & Maurin, Eric, 1999. "Persistence of Interindustry Wage Differentials: A Reexamination Using Matched Worker-Firm Panel Data," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 17(3), pages 492-533, July.
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Citations

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Cited by:
  1. Koessler, Frédéric & Forges, Françoise, 2008. "Long persuasion games," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/179, Paris Dauphine University.
  2. Marte Rønning, 2012. "The effect of working conditions on teachers’sickness absence," Discussion Papers, Research Department of Statistics Norway 684, Research Department of Statistics Norway.
  3. Torberg Falch & Bjarne Strøm, 2006. "Local flexibility in wage setting: evidence from the Norwegian local public sector," Empirical Economics, Springer, Springer, vol. 31(1), pages 113-142, March.
  4. Eggert, Wolfgang & Sørensen, Peter Birch, 2008. "The effects of tax competition when politicians create rents to buy political support," Journal of Public Economics, Elsevier, Elsevier, vol. 92(5-6), pages 1142-1163, June.
  5. Anne Lauringson, 2010. "Measuring Union Bargaining Power In The Estonian Public Sector," University of Tartu - Faculty of Economics and Business Administration Working Paper Series, Faculty of Economics and Business Administration, University of Tartu (Estonia) 72, Faculty of Economics and Business Administration, University of Tartu (Estonia).

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