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Under economic adjustment programs, do private sector wages respond to changes in public wages and employment?

Antonis Adam ()

Journal of Policy Modeling, 2020, vol. 42, issue 6, 1334-1351

Abstract: We examine the spillovers from changes in public sector wages and employment on private sector wages. Using a panel VAR model, we show that changes in public sector wages have a greater effect on private sector wages than changes in public sector employment. We motivate our analysis using the Economic Adjustment Program for Greece, and a simple theoretical model. The empirical validity of these effects is verified through a series of robustness tests. These results have important implications on the evaluation of the recent EU Economic Adjustment Programs and the future design of Internal Devaluation strategies.

Keywords: Public sector wages; Public sector employment; Panel VAR; Internal devaluation (search for similar items in EconPapers)
JEL-codes: E62 J31 J38 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jpolmod.2020.01.009

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