Labour market effects of public capital stock: evidence for the Spanish private sector

This paper provides a new rationale for the positive effect of public capital stock on employment and wages. We show that higher levels of public capital reduce wages along the wage equation and enhance employment due to the resulting larger elasticity of labour demand with respect to wages. The estimation of a structural model for the Spanish private sector reveals that this wage channel is empirically relevant. We use the estimated parameters to simulate the recent incidence of the ratio of public to private capital stock on the private sector economic performance. We find (i) sizeable effects on employment, capital stock and gross domestic product, and (ii) that the wage channel is particularly important for employment.     

Factor‐biased public infrastructure and wage inequality

This paper analyzes how factor‐biased public infrastructure affects the skilled–unskilled wage inequality. In the basic model with a full employment economy, we find that when the weighted dependence of skilled labor and capital in the urban skilled sector on public infrastructure is large enough relatively to that of unskilled labor and capital in the urban unskilled sector, the wage inequality will be expanded. We also discuss labor‐biased and capital‐biased public infrastructure in our framework, and find that the relative dependences of relevant labor or capital on public infrastructure are important determinants of wage inequality. In the extended models, we analyze separately the issue of wage inequality in the economy with unemployment and the totally open capital market, and find the results of the basic model almost still hold.     

Wage spillovers across sectors in Eastern Europe

This paper studies the interactions between wages in the public sector and the private traded and non-traded sector in ten transition countries which are members of the European Union, during the period 2000–2011. The theoretical literature on wage spillovers, as well as the Balassa–Samuelson hypothesis, suggests 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. 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.     

Public or Private Sector Wage Leadership? An International Perspective*

Whether a government acts as a wage leader, placing pressure on private‐sector wages (more open to competition), or whether it plays a passive role and merely follows wage negotiations in the private sector, there are important implications for macroeconomic development, particularly in small open economies and/or countries that are members of a monetary union, such as those of the European Monetary Union. With the notable exception of the case of Sweden, opinion on this issue is still divided. In this paper, we look at public‐ and private‐sector wage interactions from an international perspective (18 OECD countries). We focus on the causal two‐way relationship between public and private wage setting, confirming that the private sector, on the whole, appears to have a stronger influence on the public sector, rather than vice versa. However, we also find evidence of feedback effects from public wage setting, which affect private‐sector wages in a number of countries. When the private sector takes the lead on wages, there are few feedback effects from the public sector, while public wage leadership is typically accompanied by private‐sector feedback effects.     

Public Employment and the Business Cycle*

We add a public employment sector to the basic search and matching model in order to study the business cycle impact of public wage and employment policies. The government is assumed to follow exogenous rules for public wages and employment calibrated to match some cyclical features of US policies. These features include a positive public wage premium and mildly procyclical public wages and employment. We find that the presence of the public sector increases the volatility of employment and output.     

Informality,public employment and employment protection in developing countries

This paper proposes an equilibrium matching model for developing countries’ labor markets where the interaction between public, formal private and informal private sectors are taken into account. Theoretical analysis shows that gains from reforms aiming at liberalizing formal labor markets can be annulled by shifts in the public sector employment and wage policies. Since the public sector accounts for a substantial share of employment in developing countries, this approach is crucial to understand the main labor market outcomes of such economies. Wages offered by the public sector increase the outside option value of the workers during the bargaining processes in the formal and informal sectors. It becomes more profitable for workers to search on-the-job, in order to move to these more attractive and more stable types of jobs. The public sector therefore acts as an additional tax for the formal private firms. Using data on workers’ flows from Egypt, we show empirically and theoretically that the liberalization of labor markets plays against informal employment by increasing the profitability, and hence job creations, of formal jobs. The latter effect is however dampened or even sometimes nullified by the increase of the offered wages in the public sector observed at the same time.     

Who is afraid of capital mobility? on taxation of labor income and the level of public services in an open economy

This paper deals with the effects of international capital mobility on the taxation of labor income and on the size of the public sector. It employs a model of the labor market where national trade unions set the wage level in their country and national governments set the tax rate of a proportional labor-income tax. The tax revenues are used to finance a public good and unemployment benefits. In this model, competition between the national trade unions caused by international capital mobility leads to full employment, and the governments supply the public good on the first best level. As no unemployment benefits have to be financed, the tax on labor income may decline with the introduction of capital mobility. These tax cuts may even overcompensate the unions for the wage decline.     

Public–Private Sector Wage Differentials in Australia

This paper examines public–private sector wage differentials in Australia. After controlling for observed characteristics and individual fixed effects, we show that on average workers in the public sector earn about 5.1 per cent more in hourly wages than those in the private sector. The wage premium is slightly higher for females than males. Using a panel data quantile regression model with fixed effects, we show that the positive wage effects of public sector employment are heterogeneous, with comparatively larger impact at the lower end of the wage distribution than at other parts. We also find evidence of heterogeneity in the public sector wage premiums by qualification, time period, occupation and state/territory.     

Employment effects of stabilization policies

This paper studies the effects of a stabilization program based on a reduction in the devaluation rate in an optimizing model with capital controls, minimum wages for unskilled labor, an informal sector, and public production of intermediate inputs. Perfect mobility across sectors of the unskilled labor force prevents the emergence of unemployment for that category of labor, but skilled unemployment prevails in equilibrium. The analysis highlights the role of endogenous labor market segmentation in assessing the wage and employment effects of stabilization policies.     

Input Demand and the Short- and Long-Run Employment Thresholds: An Empirical Analysis for the German Manufacturing Sector

The concept of the 'employment threshold' plays an important role in the public discussion of unemployment. The employment threshold is defined as that growth rate of output necessary to keep employment constant despite the continuous rise in productivity. It is related to the Okun coefficient which describes the relationship between the changes in output and unemployment. Many contributions to this debate give the impression that the employment threshold is more or less a structural characteristic independent of economic variables. In this paper we derive short- and long-run employment thresholds from an input demand system and show empirically that they depend on factor prices and capital accumulation. Higher wage rates raise the employment threshold and reduce the probability that a positive output shock will increase employment.     

Public Sector Employment,Wage Inequality and the Gender Pay Ratio in the UK

This paper assesses the relative contributions of the different systems of pay determination in the private sector and the public sector toward the changing level of wage inequality and the gender pay ratio in the UK. The greater centralisation of pay arrangements in the public sector compared with the private sector in the UK suggests that public sector employment may have acted to offset the widening wage inequality seen in recent years, as well as making an important contribution to the increase in women's relative average earnings compared to men. This issue is addressed by drawing on unpublished occupational hourly earnings data from the New Earnings Survey and applying decomposition of the Theil index of wage inequality to analyse both static and dynamic trends. The change in wage inequality for the period 1986 to 1995 primarily reflected the change in wage dispersion within the private sector, and the narrowing of the gender pay gap among the public sector workforce was an important factor in explaining the overall improvement in women's relative earnings. The paper argues that the relatively centralised pay arrangements in the public sector, compared with the private sector, played an important role in slowing the increase in wage inequality and narrowing the gender pay gap. As such, future policies to decentralise pay determination in the UK public sector may exacerbate the increasing level of wage inequality and reverse women's recent relative pay improvements.     

Wage Assimilation of Foreigners: Which Factors Close the Gap? Evidence From Germany

This study analyzes the development of the wages of male foreign workers from all important sending countries across time using longitudinal employment register data. A cohort analysis of the individuals entering the German labor market in the years 1999 to 2001 indicates that the raw wage gap of migrants compared to native Germans decreases by 14 log percentage points in the first eight years. The results of a decomposition method based on fixed effects regression models give evidence that this wage adjustment is mostly due to time‐varying observable characteristics. Selective return migration, and the trend effects play no role for the aggregate. We find that wage assimilation happens mainly through three channels: first, through the accumulation of firm‐specific human capital, which explains approximately 40 percent; second, search gains are approximately the same order of magnitude; and third, the accumulation of general human capital explains one‐fifth of the assimilation. We further demonstrate that the importance of these channels differs substantially by the origin groups.     

The choice of technology in economic development

The impact of capital accumulation on job creation is an important and interesting issue in economic development. This model provides a general-equilibrium framework for studying technology choice with unemployment in a developing economy based on micro-foundations. Unemployment in the urban sector results from the existence of efficiency wages. Manufacturing firms engage in oligopolistic competition and choose technologies to maximise profits. A more advanced technology uses more capital and less labour. In the steady state, an increase in the amount of capital induces firms to choose more advanced technologies and the wage rate increases. While a higher capital stock always induces firms to choose more advanced technologies, urban unemployment rate may decrease and agricultural sector employment may increase.     

A contribution to the public–private wage inequality debate

This paper studies the public–private wage inequality in Romania. Although public sector employment is perceived as safer and offering more benefits, we find that in Romania it also offers higher wages, after controlling for experience, education and gender. This result is at odds with the negative premium uncovered in other transition economies. The public–private wage premium is increasing across the wage distribution, leading to more inequality in the public sector. Decomposing the wage premium into the effect of personal characteristics, coefficients and residuals, we show that only about half of this premium can be attributed to personal characteristics, especially in the top half of the wage distribution. We also find that the number of other public sector employees in the family is a significant driver of public sector employment, facilitating access to jobs. However, the effects of self‐selection are negligible, the premium being still positive and significant after controlling for this.     

Unemployment and Economic Integration for Developing Countries

While financial or trade integration between countries may increase the size of the market and aid the adoption of more advanced technologies, will it also increase the level of urban unemployment for a developing country? In this model, there is unemployment in the urban sector. Manufacturing firms engage in oligopolistic competition and choose increasing returns technologies to maximize profits. Financial firms provide capital to manufacturing firms and they also engage in oligopolistic competition. We show that an increase in the wage rate in the manufacturing sector changes neither the level of technology nor the level of employment in the manufacturing sector. While financial or trade integration between developing countries leads manufacturing firms to adopt more advanced technologies, the level and rate of employment in the manufacturing sector will not deteriorate.     

On the Cost of Opportunistic Behavior in the Public Sector: A General‐Equilibrium Approach

This paper studies the wasteful effect of bureaucracy on the economy by addressing the link between opportunistic behavior of government bureaucrats and the public sector wage bill. In particular, public officials are modeled as individuals competing for a larger share of those public funds. A simple extraction technology in the government administration is introduced in a standard real‐business‐cycle setup augmented with detailed public sector. The model is calibrated to German data for the period 1970–2007. The main findings are: (i) the model performs well vis‐à‐vis the data; (ii) due to the existence of a significant public sector wage premium and the high public sector employment, a substantial amount of working time is spent in opportunistic activities, which, in turn, leads to significant losses in terms of output; and (iii) the model‐based loss measures obtained for the EU‐12 countries are highly correlated to indices of bureaucratic inefficiency.     

国有单位工资结构及其就业规模变化的收入分配效应:1988—2007

本文使用1988年、1995年、2002年、2007年CHIP城镇入户调查数据考察国有单位工资结构及其就业规模变化的收入分配效应。为此,本文采用了分位数回归方法、以多重分位数回归为基础的Machado&Mata(2005)反事实分解方法及作者扩展了的方法。各结果表明:国有企业就业份额大幅度下降导致中国城镇工资收入差距显著下降;然而国有企业减员增效改革完成以后,国有企业工资高于非国有企业的幅度及其不合理部分大幅度上升,其结果是城镇工资收入差距扩大。     

Against the Wind: Bargaining Recentralisation and Wage Inequality in Norway 1987–91

In the late 1980s, Norway's labour market experienced similar supply and demand shifts for skills to other countries', but unlike other OECD nations, Norway's wage setting system became more centralised. The pay distribution in Norway became more compressed at the bottom from 1987 to 1991, while low wage workers in other countries lost ground relatively. Using Norwegian microdata for 1987 and 1991, I found that changing labour market prices helped cause this wage compression. Further, the less educated had declining relative overall employment but increasing relative public sector employment, both possible labour market responses to the wage compression     

Public policy,footloose capital,and union influence

This document sets up a unionized general oligopolistic equilibrium model of countries, where capital is footloose and governments maximize utilitarian welfare. When capital owners have weak influence on public policy, there is unemployment and the governments compete for jobs, causing a distortion with suboptimal wages. Then globalization—as characterized by a decrease in impediments to international investment—increases the wage elasticity of capital flight, decreasing wages and increasing employment. This benefits the capital owners and the unemployed workers getting a job, but harms the other workers. International coordination of public policy alleviates these consequences of globalization.     

The Effect of Foreign Affiliate Employment on Wages,Employment, and the Wage Share in Austria

This paper estimates the effects of outward Foreign Direct Investment (employment in affiliates abroad) on employment, wages and the wage share in Austria using panel data for the period 1996–2005. There is evidence of significant negative effects of FDI on both employment and wages, and consequently on the wage share. The results are not limited to workers in low-skilled sectors. The negative employment effect is mainly due to the rise in employment in the foreign affiliates in Eastern Europe. The negative wage effects originate from affiliate employment in both Eastern Europe and the developed countries in the industrial sector, but FDI in Eastern Europe has positive wage effects in the services sector due to possible scope effects.