Public Sector Wage Bargaining, Unemployment, and Inequality
AbstractIn many countries, the government pays almost identical nominal wages to workers living in regions with notable economic disparities. In most cases this is the result of highly centralized pay systems. By developing a two-region general equilibrium model with unions and search frictions in the labour market, I study the differences in terms of unemployment, real wages, and inequality between a regional wage bargaining process and a national one in the public sector. Adopting the former lowers public sector real salaries but it also decreases unemployment and jacks up private sector real earnings. Simulations conducted on the basis of Italian data show that, compared to a national negotiation process, a regional one also increases inequality both within and between regions.
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Bibliographic InfoPaper provided by University of Genoa, Research Doctorate in Public Economics in its series DEP - series of economic working papers with number 2/2012.
Date of creation: Feb 2012
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More information through EDIRC
public sector wages; unemployment; economic integration; local labour markets;
Find related papers by JEL classification:
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-02 (All new papers)
- NEP-CMP-2012-05-02 (Computational Economics)
- NEP-DGE-2012-05-02 (Dynamic General Equilibrium)
- NEP-GEO-2012-05-02 (Economic Geography)
- NEP-LAB-2012-05-02 (Labour Economics)
- NEP-URE-2012-05-02 (Urban & Real Estate Economics)
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