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

Listed author(s):
  • 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.

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Article provided by Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas in its journal Revista de Economía y Estadística.

Volume (Year): XLVII (2009)
Issue (Month): 2 (July)
Pages: 41-66

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Handle: RePEc:ief:reveye:v:47:y:2009:i:2:p:41-66
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  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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