Do increases in public sector wages affect inflation?

Nadoveza, Ozana

doi:10.3326/pse.49.1.1.

10741
Views

410
Downloads

Do increases in public sector wages affect inflation?

Ozana Nadoveza*

Download citation

https://doi.org/10.3326/pse.49.1.1

FULL ARTICLE

FIGURES & DATA

REFERENCES

CROSSMARK POLICY

METRICS

LICENCING

PDF

Table A1
Data and data sources, 2004-2023

Variable	Data	Source
Wages	Average wages based on regular monthly surveys of net and gross wages, classified according to the National Classification of Activities (NKD)	Croatian Bureau of Statistics (CBS), quarterly average, seasonally adjusted using X-12-ARIMA
Public sector wages	Average wages for sectors O, P, and Q based on regular monthly surveys of net and gross wages, classified according to the National Classification of Activities (NKD)	CBS, quarterly average, seasonally adjusted using X-12-ARIMA
HICP	Monthly Harmonized Index of Consumer Prices, seasonally adjusted using X-12-ARIMA, quarterly average	Eurostat, [prc_hicp_midx]
Public sector services HICP	See table A2 and graph A1	Eurostat, Cai and Vandyck (2020)
Gross domestic product (GDP)	Gross domestic product, constant prices, seasonally and calendar adjusted	Eurostat, [namq_10_a10]
Gross value added (GVA)	Gross value added, constant prices, seasonally and calendar adjusted	Eurostat, [namq_10_a10]
Gross value added (GVA) of public sector	Gross value added (GVA) of O, P, and Q sectors, constant prices, seasonally and calendar adjusted	Eurostat, [namq_10_a10]
Employment	Employed individuals based on regular monthly surveys of employment by activity	CBS, seasonally adjusted using X-12-ARIMA
Employment in public sector	Employed individuals in of O, P, and Q sectors based on regular monthly surveys of employment by activity	CBS, seasonally adjusted using X-12-ARIMA
Unemployment rate	Unemployment rate, ages 15-74, percentage of the labour force, trend-cycle data	Eurostat, [une_rt_q_h]
Productivity	GDP/employment, GVA/employment	Eurostat, [namq_10_a10] i CBS
Productivity in public sector	GVA of O-Q sectors/employment of O-Q sectors	Eurostat, [namq_10_a10] i CBS

Source: Author.

---, 2024a. HUP: Snažan realni rast plaća usporava pad inflacije. Lidermedia, April 6.

---, 2024b. Rekordno povećanje mase plaća i neto plaća u javnom sektoru nije vezano uz reformu uprave. Lidermedia, June 22.

Arce, Ó. [et al.], 2024. What caused the euro area post-pandemic inflation? ECB Occasional Paper, No. 343 [CrossRef]

Arias, J. E., Rubio‐Ramírez, J. F. and Waggoner, D. F., 2014. Inference Based on SVAR Identified with Sign and Zero Restrictions: Theory and Applications. International Finance Discussion Papers, No. 1100 [CrossRef]

Bachmann, R. and Sims, E. R., 2012. Confidence and the Transmission of Government Spending Shocks. Journal of Monetary Economics, 59(3), pp. 235-249 [CrossRef]

Bidder, R. M., 2015. Are Wages Useful in Forecasting Price Inflation? FRBSF Economic Letter, No. 2015-33.

Blanchard, O. J. and Bernanke, B. S., 2023. What Caused the US Pandemic-Era Inflation? NBER Working Paper, No. 31417 [CrossRef]

Blanchard, O. J., 1986. The Wage Price Spiral. The Quarterly Journal of Economics, 101(3), pp. 543-565 [CrossRef]

Bobeica, E., Ciccarelli, M. and Vansteenkiste, I., 2019. The Link Between Labour Cost and Price Inflation in the Euro Area. ECB Working Paper, No. 2235 [CrossRef]

Bobeica, E., Ciccarelli, M. and Vansteenkiste, I., 2021. The Changing Link Between Labour Cost and Price Inflation in the United States. ECB Working Paper, No. 2583.

Cai, M. and Vandyck, T., 2020. Bridging Between Economy-Wide Activity and Household-Level Consumption Data: Matrices for European Countries. Data in Brief, 30(June), 105395 [CrossRef]

Canova, F. and De Nicolo, G., 2002. Monetary Disturbances Matter for Business Fluctuations in the G-7. Journal of Monetary Economics, 49(6), pp. 1131-1159 [CrossRef]

Carlin, W. and Soskice, D., 2014. Macroeconomics: Institutions, Instability, and the Financial System. Oxford: Oxford University Press.

Chang, C. P. and Emery, K. M., 1996. Do Wages Help Predict Inflation? Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Q I, pp. 2-9.

Ciccarelli, M., Maddaloni, A. and Peydró, J. L., 2015. Trusting the Bankers: A New Look at the Credit Channel of Monetary Policy. Review of Economic Dynamics, 18(4), pp. 979-1002 [CrossRef]

CNB, 2024a. Inflacijski val je zauzdan prije nego što se uspjela aktivirati spirala cijena i plaća. Croatian National Bank, May 21.

CNB, 2024b. Makroekonomska kretanja i prognoze, 9(6). Zagreb: Croatian National Bank.

Conti, A. M. and Nobili, A., 2019. Wages and Prices in the Euro Area: Exploring the Nexus. Questioni di Economia e Finanza (Occasional Papers), No. 518.

Dedola, L. and Neri, S., 2007. What Does a Technology Shock Do? A VAR Analysis with Model-Based Sign Restrictions. Journal of Monetary Economics, 54(2), pp. 512-549 [CrossRef]

Deskar-Škrbić, M., Kotarac, K. and Kunovac, D., 2020. The Third Round of the Euro Area Enlargement: Are the Candidates Ready? Journal of International Money and Finance, 107, 102205 [CrossRef]

Deutsche Bundesbank, 2019. The Impact of Wages on Prices in Germany: Evidence from Selected Empirical Analyses. Deutsche Bundesbank Monthly Report, September, pp. 15-37.

ECB, 2023. Speech by Christine Lagarde, President of the ECB, at the ECB Forum on Central Banking 2023 on “Macroeconomic stabilisation in a volatile inflation environment” in Sintra, Portugal.

Forbes, K., Hjortsoe, I. and Nenova, T., 2018. The Shocks Matter: Improving Our Estimates of Exchange Rate Pass-Through. Journal of International Economics, 114(C), pp. 255-275 [CrossRef]

Foroni, C., Furlanetto, F. and Lepetit, A., 2018. Labour Supply Factors and Economic Fluctuations. International Economic Review, 59(3), pp. 1491-1510 [CrossRef]

Galí, J. and Gambetti, L., 2019. Has the U.S. Wage Phillips Curve Flattened? A Semi-Structural Exploration. NBER Working Paper, No. 25476 [CrossRef]

Government of Republic of Croatia, 2024. Osnovni koeficijenti zaposlenih u državnoj službi, Hrvatskoj vojsci i javnim službama.

Gumiel, J. and Hahn, E., 2018. The Role of Wages in the Pickup of Inflation. Economic Bulletin Boxes, 5(4).

Hahn, E., 2020. The Wage-Price Pass-Through in the Euro Area: Does the Growth Regime Matter? ECB Working Paper, No. 2485 [CrossRef]

Hu, L. and Toussaint-Comeau, M., 2010. Do Labour Market Activities Help Predict Inflation? Economic Perspectives, 34(2), pp. 52-63.

Ivanac, F., Kunovac, D. and Nadoveza, O., 2024. Kako porast plaća utječe na inflaciju. HNBlog, August 29.

Jarocinski, M. and Mackowiak, B., 2017. Granger Causal Priority and Choice of Variables in Vector Autoregressions. The Review of Economics and Statistics, 99(2), pp. 319-329 [CrossRef]

Knotek, E. S. and Zaman, S., 2014. On the Relationships Between Wages, Prices, and Economic Activity. Economic Commentary, No. 2014-14 [CrossRef]

Kovaček, D., 2024. Može li rast plaća utjecati na stopu inflacije? HRT, March 2.

Kunovac, D. and Comunale, M., 2017. Exchange Rate Pass-Through in the Euro Area. CNB Working Paper, W-46.

Peersman, G. and Straub, R., 2009. Technology Shocks and Robust Sign Restrictions in a Euro Area SVAR. International Economic Review, 50(3), pp. 727-750 [CrossRef]

Perković, B., 2024. Realne plaće padaju, a troškovi rada rastu. Stvara se katastrofalna situacija. Index.hr, October 3.

Rubio-Ramírez, J. F., Waggoner, D. F. and Zha, T., 2010. Structural Vector Autoregressions: Theory of Identification and Algorithms for Inference. The Review of Economic Studies, 77(2), pp. 665-696 [CrossRef]

Stock, J. H. and Watson, M. W., 2008. Phillips Curve Inflation Forecasts. NBER Working Paper, No. 14322 [CrossRef]

Tatierska, S., 2010. Do Unit Labour Costs Drive Inflation in the Euro Area? Bank of Slovakia Working Paper, WP 2/2010.

Uhlig, H., 2005. What Are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure. Journal of Monetary Economics, 52(2), pp. 381-419 [CrossRef]