Public sector wage growth boosts private sector wages in OECD countries.
The study looked at how public sector wages and private sector wages affect each other in OECD countries. They found that when public sector wages and employment go up, private sector wages also increase. Factors like productivity, unemployment rate, and urbanization also play a role in private sector wage growth. Public sector wage growth is influenced by fiscal conditions and private sector wages. By creating a model with two sectors and frictions, they showed how fiscal policy affects the labor market.