Wage spillovers across sectors in Eastern Europe

Gaetano D’Adamo
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Gaetano D’Adamo: Department of Economic Structure, University of Valencia, Spain
Authors registered in the RePEc Author Service: Gaetano D'Adamo ()

No 1122, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: This paper studies the interactions between wages in the public sector, the traded private sector and the closed sector in ten EU Transition Countries during the period 2000-2010. The theoretical literature on wage spillovers, as well as the Balassa-Samuelson hypothesis, suggest that the internationally traded sector should be the leader in wage setting, with sheltered and public sector wages adjusting. Using a Cointegrated VAR approach we show that a large heterogeneity across countries is present, and non-traded and public sector wages are often leaders in wage determination or at least affect traded sector wages in the short run. In some countries, public sector wages are weakly exogenous, with the private sectors adjusting. This result is relevant from a policy perspective since wage spillovers, leading to costs growing faster than productivity, may affect the international cost competitiveness of the traded sector and thus the catching-up process may be accompanied by accumulation of large international imbalances.

Keywords: Cointegrated VAR; wage setting; public sector (search for similar items in EconPapers)
JEL-codes: C32 E62 J31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2011-09
New Economics Papers: this item is included in nep-eec, nep-lab, nep-lma and nep-tra
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http://repecsrv.uv.es/paper/RePEc/pdf/eec_1122.pdf First version, 2011 (application/pdf)

Related works:
Journal Article: Wage spillovers across sectors in Eastern Europe (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eec:wpaper:1122

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