Macroeconomic Effects of Public-Sector Unions

Vasilev, Aleksandar (2015) Macroeconomic Effects of Public-Sector Unions. LABOUR, 29 (2). pp. 101-126. ISSN 1467-9914

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Motivated by the highly unionized public sectors, the high public shares in total employment,
and the public-sector wage premia observed in Europe, this paper examines the importance of
public-sector unions for macroeconomic theory. The model generates cyclical behavior in hours and
wages that is consistent with data behavior in an economy with highly unionized public sector, namely
Germany during the period 1970–2007. The union model is an improvement over a model with exogenous
public employment. In addition, endogenously determined public wage and hours add to the
distortionary effect of contractionary tax reforms by generating greater tax rate changes, thus producing
higher welfare losses.

Additional Information:The final published version of this article can be accessed online at
Keywords:business cycle fluctuations, public-sector unions, public-sector wages, public-sector employment, fiscal adjustments
Subjects:L Social studies > L130 Macroeconomics
L Social studies > L140 Econometrics
Divisions:Lincoln International Business School
ID Code:33194
Deposited On:25 Oct 2018 14:00

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