Wage spillovers in public sector contract negotiations The importance of social comparisons

• Published in: Regional science and urban economics Vol. 35; no. 4; pp. 395 - 416
• Main Authors: Babcock, Linda, Engberg, John, Greenbaum, Robert
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.07.2005; Elsevier; Elsevier Sequoia S.A
• Series: Regional Science and Urban Economics
• Subjects: Auswirkung; Causality; Contract negotiations; Data analysis; Econometrics; Economic theory; Empirical research; Gehalt; Labor negotiations; Labour market structure; Lehrer; Pennsylvania; Public economics; Public sector; Schools; Social comparisons; Soziale Norm; Spatial econometrics; Spillovers; Studies; Tarifpolitik; Teacher salaries; Teachers; Theorie; Trade unions; U.S.A; Wage determination; Wage spillovers; Wages & salaries; United States > US; Contract negotiations; Wage spillovers; Spatial econometrics; Teacher salaries; C21; J50; Social comparisons; J45
• ISSN: 0166-0462; 1879-2308
• DOI: 10.1016/j.regsciurbeco.2004.05.001

We explore the existence of wage spillovers in public sector teacher contract negotiations. We focus on the role that informal social comparisons have in determining wages. Using a combination of survey and administrative data, we estimate the relationships among a district's negotiated salary and the wages negotiated in that district's reference districts. Using panel data and spatial econometrics, we control for observed and unobserved factors that jointly determine salaries in a local labor market to isolate the causal influence of wage spillovers. We find that there are indeed causal relationships among salaries and that union “strength” influences these relationships.