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Interactions between Private and Public Sector Wages

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  • Afonso, António

    ()
    (European Central Bank)

  • Gomes, Pedro Maia

    ()
    (Universidad Carlos III de Madrid)

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 interaction mechanisms. The model is quantitative consistent with the main estimation findings.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5322.

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Length: 35 pages
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:iza:izadps:dp5322

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Keywords: public sector wages; private sector wages; employment; fiscal policy;

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References

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  9. Afonso, António & Gomes, Pedro, 2014. "Interactions between private and public sector wages," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 97-112.
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Citations

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Cited by:
  1. António Afonso & Pedro Gomes, 2008. "Interactions between Private and Public Sector Wages," Working Papers Department of Economics 2008/55, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  2. Stähler, Nikolai & Thomas, Carlos, 2012. "FiMod — A DSGE model for fiscal policy simulations," Economic Modelling, Elsevier, vol. 29(2), pages 239-261.
  3. 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.
  4. Gonzalo Fernández-de-Córdoba & Javier J. Pérez & José L. Torres, 2009. "Public and private sector wages interactions in a general equilibrium model," Banco de Espa�a Working Papers 0924, Banco de Espa�a.
  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, 03.
  6. 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.
  7. 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.

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