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Can Public Sector Wage Bills Be Reduced?

Author

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  • Pierre Cahuc

    (X - École polytechnique, ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique, CREST - Centre de Recherche en Economie et Statistique [Bruz] - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz])

  • Stéphane Carcillo

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper analyzes the relation between public wage bills and public deficits in the OECD countries from 1995 to 2009. The paper shows that fiscal drift episodes, characterized by simultaneous increases in the GDP shares of public wage bills and budget deficits, are more frequent during booms and election years, but not during recessions, except for the 2009 exceptionally strong recession. The emergence of fiscal drift episodes during booms and election years is less frequent in countries with more transparent government, more freedom of the press, as well as in countries with presidential regimes and less union coverage. Inversely, fiscal tightening episodes, characterized by simultaneous decreases in the GDP shares of public wage bills and budget deficits, occur less often during booms than during recessions. The emergence of fiscal tightening episodes during recessions and election years is less frequent in countries with more union coverage.

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  • Pierre Cahuc & Stéphane Carcillo, 2013. "Can Public Sector Wage Bills Be Reduced?," SciencePo Working papers Main hal-03470591, HAL.
    • Handle: RePEc:hal:spmain:hal-03470591
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03470591
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