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Public Sector Wage Bargaining, Unemployment, and Inequality

Listed author(s):
  • Gabriele Cardullo

    ()

    (DIEM, Faculty of Economics, University of Genoa, Italy)

In many countries, the government pays almost identical nominal wages to workers living in regions with notable economic disparities. In most cases this is the result of highly centralized pay systems. By developing a two-region general equilibrium model with unions and search frictions in the labour market, I study the differences in terms of unemployment, real wages, and inequality between a regional wage bargaining process and a national one in the public sector. Adopting the former lowers public sector real salaries but it also decreases unemployment and jacks up private sector real earnings. Simulations conducted on the basis of Italian data show that, compared to a national negotiation process, a regional one also increases inequality both within and between regions.

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File URL: http://www.dep.unige.it/RePEc/gea/wpaper/dwpo-2-feb2012.pdf
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Paper provided by University of Genoa, Research Doctorate in Public Economics in its series DEP - series of economic working papers with number 2/2012.

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Date of creation: Feb 2012
Handle: RePEc:gea:wpaper:2/2012
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  1. Alberto Alesina & Reza Baqir & William Easterly, 1998. "Redistributive Public Employment," NBER Working Papers 6746, National Bureau of Economic Research, Inc.
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  8. Strom, Bjarne, 1999. " Fiscal Institutions and Wage Bargaining in the Local Public Sector," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 67-82, March.
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  12. Robert F. Elliott & Kostas G. Mavromaras & Dominique Meurs, 2007. "Special Issue On Public Sector Pay Structures And Regional Competitiveness: Editors' Introduction," Manchester School, University of Manchester, vol. 75(4), pages 373-385, 07.
  13. Caponi, Vincenzo, 2008. "Centralized Wage Determination and Regional Unemployment Differences: The Case of Italy," IZA Discussion Papers 3592, Institute for the Study of Labor (IZA).
  14. Jolivet, Gregory & Postel-Vinay, Fabien & Robin, Jean-Marc, 2006. "The empirical content of the job search model: Labor mobility and wage distributions in Europe and the US," European Economic Review, Elsevier, vol. 50(4), pages 877-907, May.
  15. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, September.
  16. Gregory, Robert G. & Borland, Jeff, 1999. "Recent developments in public sector labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 53, pages 3573-3630 Elsevier.
  17. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, September.
  18. George J. Borjas, 2002. "The Wage Structure and the Sorting of Workers into the Public Sector," NBER Working Papers 9313, National Bureau of Economic Research, Inc.
  19. Perotti, Roberto & Alesina, Alberto, 1997. "The Welfare State and Competitiveness," Scholarly Articles 4553027, Harvard University Department of Economics.
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