Under economic adjustment programs, do private sector wages respond to changes in public wages and employment?
- Resource Type
- Authors
- Antonis Adam
- Source
- Journal of Policy Modeling. 42:1334-1351
- Subject
- Economics and Econometrics
Labour economics
Empirical validity
business.industry
Public sector
Economics
Internal devaluation
Private sector
Robustness (economics)
business
Vector autoregression
- Language
- ISSN
- 0161-8938
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.