April 24, 2014

Follow the leader? Public and private wages in the Netherlands

This study investigates wage leadership in the Netherlands. We empirically examine public and private wages using several wage definitions for the period 1980-2012. We find no evidence for public wage leadership.
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Moreover, public wages return to their previous equilibrium value three to four years after an exogenous shock in public wages. By contrast, an exogenous shock to private wages has a permanent influence on both private and public wages. These findings suggest that although a public wage freeze lowers public expenditure in the short-run, it is not an effective policy measure to lower public expenditure in the medium and long-run.

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