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Wage spillovers across sectors in Eastern Europe

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  • Gaetano D’Adamo

Abstract

This paper studies the interactions between wages in the public sector and the private traded and non-traded sector in ten transition countries which are members of the European Union, during the period 2000–2011. The theoretical literature on wage spillovers, as well as the Balassa–Samuelson hypothesis, suggests that the internationally traded sector should be the leader in wage setting, with sheltered and public sector wages adjusting. Using a cointegrated VAR approach we show that a large heterogeneity across countries is present, and non-traded and public sector wages are often leaders in wage determination or at least affect traded sector wages in the short run. This result is relevant from a policy perspective since wage spillovers, leading to costs growing faster than productivity, may affect the international cost competitiveness of the traded sector and thus the catching-up process may be accompanied by accumulation of large international imbalances. Copyright Springer-Verlag Berlin Heidelberg 2014

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  • Gaetano D’Adamo, 2014. "Wage spillovers across sectors in Eastern Europe," Empirical Economics, Springer, vol. 47(2), pages 523-552, September.
    • Handle: RePEc:spr:empeco:v:47:y:2014:i:2:p:523-552
    DOI: 10.1007/s00181-013-0744-z
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    More about this item

    Keywords

    Cointegrated VAR; Wage setting; Wage leadership ; Public sector; C32; E62; J31;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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