Interactions between Private and Public Sector Wages

57 Pages Posted: 29 Nov 2008

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa; REM - Research in Economics and Mathematics

Pedro Gomes

University of London - Economics, Mathematics and Statistics; Charles III University of Madrid

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Date Written: November 26, 2008

Abstract

We analyse the interactions between public and private sector wages per employee in OECD countries. We motivate the analysis with a dynamic labour market equilibrium model with search and matching frictions to study the effects of public sector employment and wages on the labour market, particularly on private sector wages. Our empirical evidence shows that the growth of public sector wages and of public sector employment positively affects the growth of private sector wages. Moreover, total factor productivity, the unemployment rate, hours per worker, and inflation, are also important determinants of private sector wage growth. With respect to public sector wage growth, we find that, in addition to some market related variables, it is also influenced by fiscal conditions.

Keywords: public wages, private wages, employment

JEL Classification: E24, E62, H50

Suggested Citation

Afonso, António and Gomes, Pedro M. and Gomes, Pedro M., Interactions between Private and Public Sector Wages (November 26, 2008). ECB Working Paper No. 971, Available at SSRN: https://ssrn.com/abstract=1302785 or http://dx.doi.org/10.2139/ssrn.1302785

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://www.iseg.ulisboa.pt/aquila/homepage/aafonso/research

UECE (Research Unit on Complexity and Economics) ( email )

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
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HOME PAGE: http://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

Pedro M. Gomes

Charles III University of Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

University of London - Economics, Mathematics and Statistics ( email )

United States

HOME PAGE: http://www.eco.uc3m.es/~pgomes/

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