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Wage Dynamics in Bulgaria: Co-movement and Causality

Author

Listed:
  • Hristina Manolova

    (American University in Bulgaria)

  • Aleksandar Vasilev

    (American University in Bulgaria)

Abstract

Motivated by recent debates on the possible role of wages as an income policy tool, in this study we examine the dynamic inter-relationship between wages in Bulgaria, mainly in the context of its EU accession. Relative to the WDN studies on the other EU member states, the novelty in this paper is the inclusion of the minimum wage as a possible conditional determinant of the other two wages. We demonstrate that minimum wage increases do not cause changes in average wages in either the government or the private sector. Using variety of econometric tests, we also demonstrate the leadership of private sector wage over public compensation and recommend the implementation of policy measures aimed at labor productivity growth.

Suggested Citation

  • Hristina Manolova & Aleksandar Vasilev, 2017. "Wage Dynamics in Bulgaria: Co-movement and Causality," Bulgarian Economic Papers bep-2017-08, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised Sep 2017.
    • Handle: RePEc:sko:wpaper:bep-2017-08
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    References listed on IDEAS

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    1. Aleksandar Vasilev, 2017. "On the Cost of Opportunistic Behavior in the Public Sector: A General-Equilibrium Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 565-582, April.
    2. J. Lindquist & Roger Vilhelmsson, 2006. "Is the Swedish central government a wage leader?," Applied Economics, Taylor & Francis Journals, vol. 38(14), pages 1617-1625.
    3. Breusch, T S, 1978. "Testing for Autocorrelation in Dynamic Linear Models," Australian Economic Papers, Wiley Blackwell, vol. 17(31), pages 334-355, December.
    4. Aleksandar Vasilev, 2020. "Search and Matching Frictions and Business Cycle Fluctuations in Bulgaria," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(3), pages 319-340, December.
    5. Dimitri G. Demekas & Zenon G. Kontolemis, 2000. "Government Employment and Wages and Labour Market Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(3), pages 391-415, July.
    6. Aleksandar Vasilev, 2015. "Macroeconomic Effects of Public-Sector Unions," LABOUR, CEIS, vol. 29(2), pages 101-126, June.
    7. Vasilev, Aleksandar, 2016. "A Real-Business-Cycle model with efficiency wages and fiscal policy: the case of Bulgaria," EconStor Preprints 148413, ZBW - Leibniz Information Centre for Economics.
    8. Ana Lamo & Javier J. Pérez & Ludger Schuknecht, 2008. "Public and private sector wages:comovement and casuality," Economic Working Papers at Centro de Estudios Andaluces E2008/14, Centro de Estudios Andaluces.
    9. George Economides & Thomas Moutos, 2016. "Can Minimum Wages Raise Workers’ Incomes in the Long Run?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(6), pages 961-978, December.
    10. George Economides & Thomas Moutos, 2014. "Minimum Wages as a Redistributive Device in the Long Run," CESifo Working Paper Series 5052, CESifo.
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    Cited by:

    1. Vasilev, Aleksandar, 2022. "Optimal fiscal policy in a model with efficiency wages: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 0.
    2. Vasilev, Aleksandar, 2022. "Optimal fiscal policy in a model with reciprocity in labor relations: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue EarlyCite, pages 1-24.

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    More about this item

    Keywords

    public sector wages; private sector wages; minimum wages; causality;
    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
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets

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