Institutional determinants of public-private sector linkages

Abstract

We estimate the probability of public sector leadership – defined as Granger causality from public to private sector wages – in a pool of 18 OECD countries as a function of countries’ institutional features. We find that public-private sector causality results are quite heterogeneous across countries. So, we investigate whether this is related to differences in labor and product market institutions, and notably wage-setting institutions, across countries. Government involvement in collective bargaining, bargaining centralization and collective bargaining systems with predominant regional levels’ systems are positively correlated with the probability of finding public wage leadership. Among the factors that reduce its probability we can underline the impact of globalization and a level of collective bargaining closer to the company one.