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HETEROGENEITY AND THE PUBLIC SECTOR WAGE POLICY
Author(s) -
Gomes Pedro
Publication year - 2018
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12310
Subject(s) - public sector , private sector , unemployment , matching (statistics) , wage , economics , labour economics , distribution (mathematics) , macroeconomics , economy , economic growth , mathematical analysis , statistics , mathematics
Abstract A model with search and matching frictions and heterogeneous workers was established to evaluate a reform of the public sector wage policy in steady state. The model was calibrated to the U.K. economy based on Labour Force Survey data. A review of the pay received by all public sector workers to align the distribution of wages with the private sector reduces steady‐state unemployment by 1.4 percentage points.