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Public Sector Growth and Labor Market Flexibility: The United States vs. The United Kingdom

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Rebecca M. Blank

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Abstract

This paper investigates whether a larger public sector limits labor market adjustment, using data from the United States and the United Kingdom, two countries with quite different public/private employment trends. The results indicate that the two countries have a similar mix of occupations and workers in the public versus the private sector. Both countries have experienced some overall convergence of the public/private wage differential over the 1980s, although the extent of this differential varies substantially by occupation and gender. Both countries have also seen wage inequality in the public and private sectors increase over the past decade. Variability in public sector employment and wages over time is generally as great as in the private sector, although the cyclical patterns are different. The US public sector, however, seems more responsive to private sector demand changes than does the public sector in the UK. The paper concludes that the public sectors of both countries show a substantial amount of change and adaptation, particularly over the past decade.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4339.

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Date of creation: Apr 1993
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Handle: RePEc:nbr:nberwo:4339

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Find related papers by JEL classification:
J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Ichniowski, Casey & Freeman, Richard B & Lauer, Harrison, 1989. "Collective Bargaining Laws, Threat Effects, and the Determination of Police Compensation," Journal of Labor Economics, University of Chicago Press, vol. 7(2), pages 191-209, April. [Downloadable!] (restricted)
  2. Pederson, P. J. & Schmidt-Sorensen, J. B. & Smith, N. & Westergard-Nielsen, N., 1990. "Wage differentials between the public and private sectors," Journal of Public Economics, Elsevier, vol. 41(1), pages 125-145, February. [Downloadable!] (restricted)
  3. Lawrence F. Katz & Alan B. Krueger, 1991. "Changes in the Structure of Wages in the Public and Private Sectors," NBER Working Papers 3667, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Rebecca M. Blank, 1985. "An analysis of workers' choice between employment in the public and private sectors," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 38(2), pages 211-224, January.
  5. Richard B. Freeman, 1987. "How Do Public Sector Wages and Employment Respond to Economic Conditions?," NBER Chapters, in: Public Sector Payrolls, pages 183-216 National Bureau of Economic Research, Inc. [Downloadable!]
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  6. Auld, D. A. L. & Christofides, L. N. & Swidinsky, R. & Wilton, D. A., 1980. "A microeconomic analysis of wage determination in the Canadian public sector," Journal of Public Economics, Elsevier, vol. 13(3), pages 369-387, June. [Downloadable!] (restricted)
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  7. Dickerson, Andrew P & Stewart, Mark B, 1993. "Is the Public Sector Strike Prone?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 253-84, August.
  8. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150, March.
  9. Joseph Gyourko & Joseph Tracy, 1986. "An Analysis of Public and Private Sector Wages Allowing for Endogenous Choices of Both Government and Union Status," NBER Working Papers 1920, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. repec:fth:prinin:282 is not listed on IDEAS
  11. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116.
  12. Kay, J A & Thompson, D J, 1986. "Privatisation: A Policy in Search of a Rationale," Economic Journal, Royal Economic Society, vol. 96(381), pages 18-32, March. [Downloadable!] (restricted)
  13. Steven F. Venti, 1987. "Wages in the Federal and Private Sectors," NBER Chapters, in: Public Sector Payrolls, pages 147-182 National Bureau of Economic Research, Inc. [Downloadable!]
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  14. F Green & Stephen Machin & Alan Manning, 1992. "The Employer Size-Wage Effect: Is Monopsony the Explanation?," CEP Discussion Papers dp0079, Centre for Economic Performance, LSE.
  15. Ronald G. Ehrenberg & Joshua L. Schwarz, 1987. "Public Sector Labor Markets," NBER Working Papers 1179, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Peter S. Heller & Alan A. Tait, 1983. "Government Employment and Pay: Some International Comparisons," IMF Occasional Papers 24, International Monetary Fund.
  17. Keller, Wouter J., 1981. "Public sector employment and the distribution of income," Journal of Public Economics, Elsevier, vol. 15(2), pages 235-249, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nick Adnett, 1998. "The Acquired Rights Directive and Compulsory Competitive Tendering in the UK: An Economic Perspective," European Journal of Law and Economics, Springer, vol. 6(1), pages 69-81, July. [Downloadable!] (restricted)
  2. Asma Hyder & Barry Reilly, 2005. "The Public and Private Sector Pay Gap in Pakistan: A Quantile Regression Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(3), pages 271-306. [Downloadable!]
  3. Torberg Falch, 2002. "Wage Bargaining and Employer Objectives," Working Paper Series 2402, Department of Economics, Norwegian University of Science and Technology. [Downloadable!]
    Other versions:
  4. George C. Bitros & Kyprianos Prodromidis, 2004. "Welfare benefits and the rate of unemployment: some evidence from the European Union in the last thirty years," Macroeconomics 0410004, EconWPA. [Downloadable!]
  5. Asma Hyder, 2007. "Wage Differentials, Rate of Return to Education, and Occupational Wage Share in the Labour Market of Pakistan," PIDE-Working Papers 2007:17, Pakistan Institute of Development Economics. [Downloadable!]
    Other versions:
  6. Peter Gottschalk, 1997. "The Impact of Changes in Public Employment on Low Wage Labor Markets," Boston College Working Papers in Economics 397, Boston College Department of Economics. [Downloadable!]
  7. Gabriela Miranda Moriconi & João S. Moura Neto & Nelson Marconi & Paulo Roberto Arvate, 2006. "Evidências Sobre O Comportamento Dos Governos Estaduais Na Determinação Dos Salários Dos Servidores Públicos No Brasil," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting] 135, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
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