Interactions between private and public sector wages

Afonso, António; Gomes, Pedro

doi:10.1016/j.jmacro.2013.12.003

Cited by 77 publications

(90 citation statements)

References 21 publications

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“…This may be alluding to the fact that the long-run relation is crucially affected by second-round effects via inflation. By contrast, in the short-run, there is no size effect, with each 1% increase (fall) in government nominal compensations leading on average to 0.25% increase (fall) in manufacturing compensations, independently of whether the general government is a large or a small employer, a coefficient that is consistent with results from other studies (Afonso and Gomes 2014).…”

supporting

confidence: 87%

“…This research is less specific about the origin of changes in public/private wages and mainly devoted to understanding how different sectoral wages relate one to the other using a variety of statistical techniques ranging from co-integration and error correction models to vector autoregressive (VAR) systems or both. Afonso and Gomes (2014) test the relationship between real general government and private wages on a panel of 18 OECD countries using a simple 2SLS estimation and allowing for an error correction term. Their analysis is mostly about the interaction between public and private wages and provides only indirect evidence on causality.…”

Section: The Public-private Wage Link In the Literaturementioning

confidence: 99%

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Co-movements between public and private wages in the EU: what factors and with what policy implications?

Marzinotto

Turrini

2017

IZA J Labor Stud

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This paper assesses the relationship between public and private wages in the EU, as measured by general government and manufacturing compensations, respectively. We find that the long-run relation between the two is stronger when the government is a large employer. Manufacturing compensations are better aligned with productivity and unemployment when general government compensations, to which they generally respond, are set through bargaining. Finally, manufacturing compensations react in the same way whether those in the general government sector are increased or cut, a relation that seems to hold also under fiscal consolidation provided the government is a large employer.JEL Classification: C32, E24, E62, H59

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supporting

confidence: 87%

Section: The Public-private Wage Link In the Literaturementioning

confidence: 99%

Co-movements between public and private wages in the EU: what factors and with what policy implications?

Marzinotto

Turrini

2017

IZA J Labor Stud

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“…The wage bargaining is undertaken by a union. The public sector wage and employment levels are autonomously set by the government as in Quadrini and Trigari (2007), Afonso and Gomes (2008) or Gomes (2009 We will start by describing the household sector in section 2.1. Then, we turn to the production sector in section 2.2, while section 2.3 details the labor market.…”

Section: The Modelmentioning

confidence: 99%

FiMod — A DSGE model for fiscal policy simulations

2012

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Abstract:This paper develops a medium-scale dynamic, stochastic, general equilibrium (DSGE) model for fiscal policy simulations. Relative to existing models of this type, our model incorporates a two-country monetary union structure, which makes it well suited to simulate fiscal measures by relatively large countries in a currency area. We also provide a notable degree of disaggregation on the government expenditures side, by explicitly distinguishing between (productivity-enhancing) public investment, public purchases and the public sector wage bill. Finally, we consider a labor market characterized by search and matching frictions, which allows to analyze the response of equilibrium unemployment to fiscal measures.In order to illustrate some of its applications, and motivated by recent policy debate in the Euro Area, we calibrate the model to Spain and the rest of the area and simulate a number of fiscal consolidation scenarios. We find that, in terms of output and employment losses, fiscal consolidation is the least damaging when achieved by reducing the public sector wage bill, whereas it is most damaging when carried out by cutting public investment.Keywords: General Equilibrium, Fiscal Policy Simulations, Labor Market Search JEL codes: E24, E32, E62, H20, H50 Non-technical summaryThe recent crisis has obliged governments around the world to put in place ambitious fiscal stimulus plans and the ensuing fiscal consolidation (or "exit") strategies in order to assure fiscal stability. The latter issue is moving center stage in current public debates. In order to bring fiscal balances back on track, fiscal authorities mainly have the possibility of increasing taxes and/or cutting public spending.But which taxes should be increased? Which spending components should be cut?All across Europe, countries such as Germany, Greece, Portugal, Spain and others have put forward consolidation plans that include cuts in public employment, public wages and public investment as well as increases in VAT and labor income tax rates. Which consequences can we expect from these measures on, among others, the spillover effects of fiscal actions in one country to the other. Second, we provide a notable degree of disaggregation on the fiscal expenditures side. In particular, we explicitly distinguish between public investment and public consumption; the latter in turn is divided between public purchases and the public sector wage bill. Each of these components has a distinct effect on the rest of the economy.The model thus allows simulating specific measures that have been implemented recently in a number of European countries, such as cuts in public sector wages and/or employment, and reductions in public investment. Fiscal expenditures are completed with a number of transfers to the private sector, including unemployment benefits and lump-sum subsidies. On the fiscal revenues side, the model considers also a wide range of taxes, including taxes on consumption, labor income, returns on bond holdings and on physical capital, and socia...

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“…See for instance Alesina et al (2002), Afonso and Gomes (2008), Lamo, Pérez and Schuknecht (2012), Marzinotto and Turrini (2016) or Holm-Hadulla, et al (2010). 4 See, among others, Campos et al (2015).…”

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confidence: 99%

The Fiscal and Macroeconomic Effects of Government Wages and Employment Reform

et al. 2016

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Interactions between private and public sector wages

Abstract: This paper can be downloaded without charge from http://www.ecb.europa.eu or from the Social Science Research Network electronic library at http://ssrn.com/abstract_id=1302785.

Cited by 77 publications

References 21 publications

Co-movements between public and private wages in the EU: what factors and with what policy implications?

Co-movements between public and private wages in the EU: what factors and with what policy implications?

FiMod — A DSGE model for fiscal policy simulations

The Fiscal and Macroeconomic Effects of Government Wages and Employment Reform

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