The Welfare and Employment Effects of Centralized Public Sector Wage Bargaining

Gabriele Cardullo

MPRA Paper from University Library of Munich, Germany

Abstract: In many countries, the government pays almost identical nominal wages to workers living in regions with notable economic disparities. By developing a two-region general equilibrium model with endogenous migration and search frictions in the labour market, I study the differences in terms of unemployment, real wages, and welfare between a regional wage bargaining process and a national one in the public sector. Adopting the latter makes residents in the poorer region better off and residents of the richer region worse off. Private sector employment decreases in the poorer region and it increases in the richer one. Under some conditions, the unemployment rate in the poorer region soars. Simulation results also show that a regional bargaining scheme may increase inequality.

Keywords: public sector wages; centralized pay regulation; unemployment. (search for similar items in EconPapers)
JEL-codes: J45 J50 R13 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-dge and nep-lab
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Related works:
Journal Article: The Welfare and Employment Effects of Centralized Public Sector Wage Bargaining (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:66879

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