Interactions between Private and Public Sector Wages

Antonio Afonso and Pedro Gomes

No 5322, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine the interactions between public and private sector wages per employee in OECD countries. 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 and the degree of urbanisation are also important determinants of private sector wage growth. With respect to public sector wage growth, we find that it is influenced by fiscal conditions in addition to private sector wages. We then set up a dynamic labour market equilibrium model with two sectors, search and matching frictions and exogenous growth to understand the interaction mechanisms. The model is quantitative consistent with the main estimation findings.

Keywords: employment; private sector wages; public sector wages; fiscal policy (search for similar items in EconPapers)
JEL-codes: E24 E62 H50 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2010-11
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published - published in: Journal of Macroeconomics, 2014, 39, 97-112.

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Related works:
Journal Article: Interactions between private and public sector wages (2014)
Working Paper: Interactions between private and public sector wages (2008)
Working Paper: Interactions between Private and Public Sector Wages (2008)
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