Is There a Signalling Role for Public Wages? Evidence for the Euro Area Based on Macro Data

Pérez, Javier J.; Fuentes, Antonio Jesús Sánchez

doi:10.2139/ssrn.1532315

Cited by 5 publications

(5 citation statements)

References 10 publications

(13 reference statements)

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“…For Spain,Catalan and Lama (2006) estimated that a reduction in real government spending by 1.5 percentage point of GDP would improve the current account balance by 1 percentage point of GDP.34 Thus, in that case, it would be better to index to the lowest inflation country in the union, but this is also politically difficult to do.35 Perez and Sanchez (2010) found strong evidence that public wages play a signaling role for private wages in four main euro area economies, i.e. Germany, France, Italy and Spain.…”

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confidence: 99%

Current Account Imbalances in the Southern Euro Area

2010

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This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.The paper examines the causes, consequences, and potential cures of the large current account deficits in the Southern Euro Area (SEA). These were mostly driven by a decline in private saving rates. But it was the European Monetary Union and the Euro, which enabled these countries to maintain investment rates, and thus run larger current account deficits, by improving their access to the international pool of saving. The paper finds that the deficits in SEA in 2008 were larger than can be explained by fundamentals, though the situation varies substantially across countries. It also finds that although the global financial crisis has started to force some unwinding, the current account deficits are expected to remain high in the medium run, though again with substantial variation across countries. The paper argues these large external deficits pose risks to the economy and therefore matter, even in a currency union, and discusses some policy options to reduce them.

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confidence: 99%

Current Account Imbalances in the Southern Euro Area

2010

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“…Differences across sectors in institutional settings-e.g., pay regulation, unionisation, and collective bargaining coverageare therefore likely to affect relative wage levels. Evidence suggests that the degree of unionisation in the public sector tends to be higher than in the private sector (Lucifora and Meurs, 2006;Perez and Sanchez, 2010;Giordano et. al., 2011;Dickson et.…”

Section: A Theoretical Evidencementioning

confidence: 99%

“…The empirical evidence on these wage interactions is relatively mixed with no clear consensus on which sectoral wages help determine the economy-wide wage setting process. Some studies find evidence for a significant impact of public wages on private sector wages (Friberg 2007;Perez and Sanchez, 2010;Afonso and Gomes, 2014). Others find that the private sector tends to lead the wage-setting process (Lindquist and Vilhelmsson, 2006;Lamo et.…”

Section: Macroeconomic Effects Of Changes In Public Sector Wagesmentioning

confidence: 99%

Public-Private Wage Differentials and Interactions Across Countries and Time

Coady¹,

Jirasavetakul²,

Abdallah³

2023

IMF Working Papers

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“…Private wages are found to lead in Germany, Greece, Portugal and the euro area aggregate, while no causality is found for the other euro area countries. Similarly, Pérez and Sánchez (2010) investigate the signalling effect of public wages on private wages in the four largest euro area economies. By controlling for prices, productivity and institutional variables, the authors find that public wages have a signalling effect (lead) on private wages in France and Italy, whereas the there is a bi-directional effect between public and private wages in Germany and Spain.…”

Section: Prepared By Cristina Checherita-westphal João Domingues Seme...mentioning

confidence: 99%