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On the substitutability between public and private employment

  • Gonzalo F De córdoba

    ()

    (Universidad de Málaga)

  • Javier J Pérez

    ()

    (Bank of Spain)

  • José L Torres

    ()

    (Universidad de Málaga)

In this note we provide empirical evidence that shows that there seems to be a high degree of substitutability between public and private employment. We estimate an aggregated production function with a CES specification over labor inputs both public and private. Under the assumption that private and public workers are paid their marginal products, we obtain an equation that relates wages' ratios with employment ratios. By estimating that expression for a number of OECD countries we find that for most countries this simple model can explain strikingly well the dynamics of the observed relationship between private and public labor sectors.

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File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I3-P260.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 32 (2012)
Issue (Month): 3 ()
Pages: 2700-2709

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Handle: RePEc:ebl:ecbull:eb-12-00329
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  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. Gonzalo Fernández-de-Córdoba & Javier Pérez & José Torres, 2012. "Public and private sector wages interactions in a general equilibrium model," Public Choice, Springer, vol. 150(1), pages 309-326, January.
  3. Junichiro Ishida & Noriaki Matsushima, 2006. "Should civil servants be restricted in wage bargaining? A mixed-duopoly approach," Discussion Papers 2006-07, Kobe University, Graduate School of Business Administration.
  4. Domeij, David & Ljungqvist, Lars, 2006. "Wage Structure and Public Sector Employment: Sweden versus the United States 1970-2002," SSE/EFI Working Paper Series in Economics and Finance 638, Stockholm School of Economics.
  5. Zenon Kontolemis G. & Dimitri G. Demekas, 1999. "Government Employment and Wages and Labor Market Performance," IMF Working Papers 99/55, International Monetary Fund.
  6. Keith A. Bender, 2003. "Examining Equality between Public- and Private-Sector Wage Distributions," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 62-79, January.
  7. Ardagna, Silvia, 2007. "Fiscal Policy in Unionized Labor Markets," Scholarly Articles 2580048, Harvard University Department of Economics.
  8. Ardagna, Silvia, 2007. "Fiscal policy in unionized labor markets," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1498-1534, May.
  9. Bender, Keith A, 1998. " The Central Government-Private Sector Wage Differential," Journal of Economic Surveys, Wiley Blackwell, vol. 12(2), pages 177-220, April.
  10. Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2008. "Public and private sector wages:comovement and casuality," Economic Working Papers at Centro de Estudios Andaluces E2008/14, Centro de Estudios Andaluces.
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