Can Public Sector Wage Bills Be Reduced?
National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA); French National Center for Scientific Research (CNRS); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)
Organisation for Economic Co-operation and Development (OECD); Sciences Po; IZA
NBER Working Paper No. w17881
This paper analyzes the relation between public wage bills and public deficits in the OECD countries from 1995 to 2009. The paper shows that fiscal drift episodes, characterized by simultaneous increases in the GDP shares of public wage bills and budget deficits, are more frequent during booms and election years, but not during recessions, except for the 2009 exceptionally strong recession. The emergence of fiscal drift episodes during booms and election years is less frequent in countries with more transparent government, more freedom of the press, as well as in countries with presidential regimes and less union coverage. Inversely, fiscal tightening episodes, characterized by simultaneous decreases in the GDP shares of public wage bills and budget deficits, occur less often during booms than during recessions. The emergence of fiscal tightening episodes during recessions and election years is less frequent in countries with more union coverage.
Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Number of Pages in PDF File: 46
Date posted: February 25, 2012
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.266 seconds