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Fiscal Transfers, Public Sector Wage Premium and the Effects on Private Wages


  • Marcelo Capello

    (Instituto de Economía y Finanzas (IEF) , Facultad de Ciencias Económicas , Universidad Nacional de Córdoba (UNC). Instituto de Estudios sobre la Realidad Argentina y Latinoamericana (IERAL))

  • Alberto Figueras

    (Instituto de Economía y Finanzas (IEF) , Facultad de Ciencias Económicas , Universidad Nacional de Córdoba (UNC))

  • Sebastián Freille

    (Facultad de Ciencia Política y Relaciones Internacionales (UCC). Consejo Nacional de Investigaciones Científicas y Técnicas (CONICET). Facultad de Ciencias Económicas, Universidad Nacional de Córdoba (UNC))

  • Pedro Esteban Moncarz

    () (Instituto de Economía y Finanzas (IEF) , Facultad de Ciencias Económicas , Universidad Nacional de Córdoba (UNC))


We examine the relationship between federal transfers, the existence of a wage premium for the public sector and its effects on private wages in Argentina. The empirical analysis is based on the theoretical presumption that federal fiscal transfers to the different regions are being used to finance more public employment therefore discouraging private activity. The results suggest that the public sector pays a wage premium relative to the private sector. This premium is increasing in the level of per capita federal transfers. There is no evidence of an overall positive effect on wages in the private manufacturing sector. However, we find a significant positive relationship between federal transfers and wages paid to workers with less formal education; for jobs requiring a technical or profesional qualification the relationship is negative. These results broadly support the hypothesis that the private sector faces harder competition in the labour market in provinces which receive larger transfers from the central government.

Suggested Citation

  • Marcelo Capello & Alberto Figueras & Sebastián Freille & Pedro Esteban Moncarz, 2009. "Fiscal Transfers, Public Sector Wage Premium and the Effects on Private Wages," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 0(2), pages 41-66, July.
  • Handle: RePEc:ief:reveye:v:47:y:2009:i:2:p:41-66

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    References listed on IDEAS

    1. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, vol. 92(3), pages 571-589, June.
    2. repec:hrv:faseco:3353756 is not listed on IDEAS
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    Cited by:

    1. Capello, Marcelo & Figueras, Alberto & Freille, Sebastian & Moncarz, Pedro, 2013. "The role of federal transfers in regional convergence in human development indicators in Argentina," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 27, pages 33-63.

    More about this item


    Inter-governmental Transfers; Labour Markets; Wage Premium; Fiscal Policy;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • 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
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes


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