TITLE

Wage spillovers across sectors in Eastern Europe

AUTHOR(S)
D'Adamo, Gaetano
PUB. DATE
September 2014
SOURCE
Empirical Economics;Sep2014, Vol. 47 Issue 2, p523
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This paper studies the interactions between wages in the public sector and the private traded and non-traded sector in ten transition countries which are members of the European Union, during the period 2000-2011. The theoretical literature on wage spillovers, as well as the Balassa-Samuelson hypothesis, suggests that the internationally traded sector should be the leader in wage setting, with sheltered and public sector wages adjusting. Using a cointegrated VAR approach we show that a large heterogeneity across countries is present, and non-traded and public sector wages are often leaders in wage determination or at least affect traded sector wages in the short run. This result is relevant from a policy perspective since wage spillovers, leading to costs growing faster than productivity, may affect the international cost competitiveness of the traded sector and thus the catching-up process may be accompanied by accumulation of large international imbalances.
ACCESSION #
97288616

 

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