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

33 Pages Posted: 26 Jan 2010

See all articles by Javier J. Pérez

Javier J. Pérez

Banco de España - Research Department

Antonio Jesus Sanchez Fuentes

Universidad Complutense de Madrid (UCM); Universidad Complutense de Madrid (UCM) - Institute of International Studies (ICEI)

Multiple version iconThere are 2 versions of this paper

Date Written: January 21, 2010

Abstract

Do public sector wages exert pressures on private sector wages, or has the private sector a leadership role in wage setting? This paper tries to isolate the pure signalling effect that one sector might exert on the other by controlling for other determinants of wages (prices, productivity, institutions) for the main euro area economies (Germany, France, Italy and Spain) and the periods 1980-2007 and 1991-2007. It exploits available quarterly information not yet used in the literature, and combines different data sources in the framework of mixed-frequencies time series models. The quarterly frequency of our data allows us to check the existence of purely intra-annual links between public and private sector wages (signalling effect). There is strong evidence of public wages’ leadership, either in conjunction with bi-directional links from the private sector (Germany and Spain) or pure public wage leadership (France in the sample 1991-2007, Italy for within-the-year linkages).

Keywords: Government Wages, Private Sector Wages, Signalling, Causality, Mixed Frequency Data, Causal Graph

JEL Classification: C32, C53, J30, J51, J52, E62, E63, H50, H6

Suggested Citation

Perez, Javier J. and Sanchez Fuentes, Antonio Jesus, Is There a Signalling Role for Public Wages? Evidence for the Euro Area Based on Macro Data (January 21, 2010). ECB Working Paper No. 1148, Available at SSRN: https://ssrn.com/abstract=1532315 or http://dx.doi.org/10.2139/ssrn.1532315

Javier J. Perez

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain

HOME PAGE: http://www.bde.es/investigador/staff/95.htm

Antonio Jesus Sanchez Fuentes (Contact Author)

Universidad Complutense de Madrid (UCM) ( email )

Madrid, 28040
Spain

Universidad Complutense de Madrid (UCM) - Institute of International Studies (ICEI) ( email )

Collado Villalba, Madrid, 28400
United States

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