IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2014-192.html
   My bibliography  Save this paper

Public Employment and Compensation Reform During Times of Fiscal Consolidation

Author

Listed:
  • Lorenzo Forni
  • Natalija Novta

Abstract

This paper compiles and compares recent and past measures introduced to contain the public wage bill in a number of emerging and advanced economies to assess their effectiveness in bringing down expenditure in a sustained way. In the aftermath of the Great Recession a number of countries have approved measures on the wage bill as part of fiscal consolidation efforts. These recent episodes are compared to past cases implemented in advanced economies over the period 1979–2009. Findings suggest that public wage bill consolidation episodes pre and post 2009 are similar in many respects. Moreover, typically countries that were able to achieve more sustained reductions in the wage bill have implemented to larger extent structural measures, and/or these measures were accompanied with substantial social dialogue and consensus.

Suggested Citation

  • Lorenzo Forni & Natalija Novta, 2014. "Public Employment and Compensation Reform During Times of Fiscal Consolidation," IMF Working Papers 2014/192, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2014/192
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=42413
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nunberg, B. & Nellis, J., 1995. "Civil Service Reform and the World Bank," World Bank - Discussion Papers 161, World Bank.
    2. Mauro, Paolo & Romeu, Rafael & Binder, Ariel & Zaman, Asad, 2015. "A modern history of fiscal prudence and profligacy," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 55-70.
    3. International Monetary Fund, 2010. "Evaluating Government Employment and Compensation," IMF Technical Notes and Manuals 2010/015, International Monetary Fund.
    4. Christina D. Romer & David H. Romer, 2010. "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," American Economic Review, American Economic Association, vol. 100(3), pages 763-801, June.
    5. 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, March.
    6. Pérez, Javier J. & Giordano, Raffaela & Depalo, Domenico & Coutinho Pereira, Manuel & Eugène, Bruno & Papapetrou, Evangelia & Reiss, Lukas & Roter, Mojca, 2011. "The public sector pay gap in a selection of Euro area countries," Working Paper Series 1406, European Central Bank.
    7. Olivier Blanchard & Florence Jaumotte & Prakash Loungani, 2014. "Labor market policies and IMF advice in advanced economies during the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-23, December.
    8. Olivier Blanchard & Florence Jaumotte & Prakash Loungani, 2014. "Labor market policies and IMF advice in advanced economies during the Great Recession," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-23, December.
    9. World Bank, 2002. "Civil Service Reform : Strengthening World Bank and IMF Collaboration," World Bank Publications - Books, The World Bank Group, number 15242, December.
    10. Haltiwanger, John & Singh, Manisha, 1999. "Cross-Country Evidence on Public Sector Retrenchment," The World Bank Economic Review, World Bank, vol. 13(1), pages 23-66, January.
    11. Mr. Andrea Pescatori & Mr. Daniel Leigh & Mr. Jaime Guajardo & Mr. Pete Devries, 2011. "A New Action-Based Dataset of Fiscal Consolidation," IMF Working Papers 2011/128, International Monetary Fund.
    12. International Monetary Fund, 2010. "Evaluating Government Employment and Compensation," IMF Technical Notes and Manuals 10/15, International Monetary Fund.
    13. Mr. Daniel Leigh & Mr. Andrea Pescatori & Mr. Jaime Guajardo, 2011. "Expansionary Austerity New International Evidence," IMF Working Papers 2011/158, International Monetary Fund.
    14. Ms. Annalisa Fedelino & Mr. Gerd Schwartz & Marijn Verhoeven, 2006. "Aid Scaling Up: Do Wage Bill Ceilings Stand in the Way?," IMF Working Papers 2006/106, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stephanie J. Rickard & Teri L. Caraway, 2019. "International demands for austerity: Examining the impact of the IMF on the public sector," The Review of International Organizations, Springer, vol. 14(1), pages 35-57, March.
    2. Javier J. Pérez & Marie Aouriri & Maria M. Campos & Dmitrij Celov & Domenico Depalo & Evangelia Papapetrou & Jurga Pesliakaite & Roberto Ramos Magdaleno & Marta Rodríguez-Vives, 2016. "The fiscal and macroeconomic effects of government wages and employment reform," Occasional Papers 1607, Banco de España.
    3. Juin‐Jen Chang & Hsieh‐Yu Lin & Nora Traum & Shu‐Chun S. Yang, 2021. "Fiscal Consolidation and Public Wages," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(2-3), pages 503-533, March.
    4. Sónia Araújo & Stéphanie Guichard, 2018. "Costa Rica: Restoring fiscal sustainability and setting the basis for a more growth-friendly and inclusive fiscal policy," OECD Economics Department Working Papers 1484, OECD Publishing.
    5. Hans Pitlik, 2017. "Österreich 2025 – Verwaltungsreform zwischen Effizienzstreben und Reformwiderständen. Ein Überblick," WIFO Monatsberichte (monthly reports), WIFO, vol. 90(3), pages 205-217, March.
    6. Marta Rahona-López & Inés P. Murillo-Huertas & Maria del Mar Salinas-Jiménez, 2016. "Wage differentials by sector and gender: a quantile analysis for the Spanish case," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 19(1), pages 20-38, March.
    7. Olga V. Bogacheva & Oleg V. Smorodinov, 2020. "Disbalance in Pay Structure of Employees in Federal Budgetary Institutions," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 113-125, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lorenzo Forni & Natalija Novta, 2016. "Public employment and compensation reform: the role of social dialogue and structural measures," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(5), pages 960-979, October.
    2. Mr. Ruy Lama & Juan Pablo Medina Guzman, 2015. "Fiscal Consolidation During Times of High Unemployment: The Role of Productivity Gains and Wage Restraint," IMF Working Papers 2015/262, International Monetary Fund.
    3. Antoine Goujard, 2017. "Cross‐Country Spillovers from Fiscal Consolidations," Fiscal Studies, Institute for Fiscal Studies, vol. 38, pages 219-267, June.
    4. Attinasi, Maria Grazia & Klemm, Alexander, 2016. "The growth impact of discretionary fiscal policy measures," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 265-279.
    5. Christoph A. Schaltegger & Martin Weder, 2014. "Fiscal adjustment and the costs of public debt service: evidence from OECD countries," Applied Economics, Taylor & Francis Journals, vol. 46(22), pages 2593-2610, August.
    6. Alari PaulusBy & Francesco Figari & Holly Sutherland, 2017. "The design of fiscal consolidation measures in the European Union: distributional effects and implications for macro-economic recovery," Oxford Economic Papers, Oxford University Press, vol. 69(3), pages 632-654.
    7. Cimadomo, Jacopo & Hauptmeier, Sebastian & Zimmermann, Tom, 2014. "Fiscal consolidations and bank balance sheets," Journal of International Money and Finance, Elsevier, vol. 45(C), pages 74-90.
    8. Ponticelli, Jacopo & Voth, Hans-Joachim, 2020. "Austerity and anarchy: Budget cuts and social unrest in Europe, 1919–2008," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 1-19.
    9. Roel Beetsma & Jacopo Cimadomo & Oana Furtuna & Massimo Giuliodori1, 2015. "The confidence effects of fiscal consolidations," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 30(83), pages 439-489.
    10. Paula Gil & Francisco Martí & Richard Morris & Javier J. Pérez & Roberto Ramos, 2019. "The output effects of tax changes: narrative evidence from Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(1), pages 1-23, March.
    11. Nicolas Carnot & Francisco de Castro, 2015. "The Discretionary Fiscal Effort: An Assessment of Fiscal Policy and Its Output Effect," Hacienda Pública Española / Review of Public Economics, IEF, vol. 215(4), pages 63-94, December.
    12. Elva Bova & Christina Kolerus & Sampawende Tapsoba, 2015. "A fiscal job? An analysis of fiscal policy and the labor market," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-17, December.
    13. Osti, Davide, 2013. "The Macroeconomic Effects of Tax Changes: Evidence from Southern European Regions," MPRA Paper 79892, University Library of Munich, Germany.
    14. Andrea Tafuro, 2015. "The Effects of Fiscal Policy on Employment: an Analysis of the Aggregate Evidence," Working Papers 2015: 03, Department of Economics, University of Venice "Ca' Foscari".
    15. Gianluca Cafiso & Roberto Cellini, 2014. "Fiscal consolidations and public debt in Europe," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(4), pages 614-644, August.
    16. Jacopo Cimadomo & Sebastian Hauptmeier & Tom Zimmermann, 2012. "Fiscal Consolidations and Banking Stability," Working Papers 2012-32, CEPII research center.
    17. Yang, Weonho & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Macroeconomic effects of fiscal adjustment: A tale of two approaches," Journal of International Money and Finance, Elsevier, vol. 57(C), pages 31-60.
    18. repec:zbw:bofrdp:2013_011 is not listed on IDEAS
    19. Matti Viren, 2012. "Problems of fiscal consolidation and policy coordination," Discussion Papers 82, Aboa Centre for Economics.
    20. El-Shagi, Makram & Schweinitz, Gregor von, 2021. "Fiscal policy and fiscal fragility: Empirical evidence from the OECD," Journal of International Money and Finance, Elsevier, vol. 115(C).
    21. Oliver Falck & Siegfried Schönherr, 2016. "An Economic Reform Agenda for Croatia: a comprehensive economic reform package prepared for the Croatian Statehood Foundation," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 70.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2014/192. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.