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Public–private sector wage differentials and the business cycle

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  • Maczulskij, Terhi

Abstract

This paper uses microeconomic data for the period from 1990 to 2004 to examine the relationship between public–private sector wage differentials and labour market conditions in Finland. The results show that the public sector wage premium is strongly counter-cyclical. On average, a 10 percent increase in the local unemployment rate increases the public–private sector wage gap by one percent. Separate analyses by government sector and quantiles of the distribution of wages reveal that it is local government workers and those working at lower skill levels who benefit more from increasing unemployment rate. The paper also exploits the longitudinal structure of the data to examine whether the results are constant over time. These results indicate that the cyclical pattern primarily emerges in years with deteriorated labour markets.

Suggested Citation

  • Maczulskij, Terhi, 2013. "Public–private sector wage differentials and the business cycle," Economic Systems, Elsevier, vol. 37(2), pages 284-301.
  • Handle: RePEc:eee:ecosys:v:37:y:2013:i:2:p:284-301
    DOI: 10.1016/j.ecosys.2012.10.002
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    Cited by:

    1. Puškárová Paula & Zajac Štefan, 2014. "Innovation and Competitiveness of the Slovak Economy: New Evidence of International Impacts in the Knowledge Accumulation Process," International Journal of Management and Economics, De Gruyter Open, vol. 42(1), pages 81-97, June.
    2. Zhuravleva, Tatiana, 2015. "Analysis of the Factors of Wages Differentiation in the Public and Private Sectors of the Russian Economy," Published Papers mn10, Russian Presidential Academy of National Economy and Public Administration.
    3. repec:eee:ecosys:v:41:y:2017:i:2:p:248-265 is not listed on IDEAS

    More about this item

    Keywords

    Public sector pay; Wage curve;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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