Public administration labor cost forecasting and wage distribution. An exploratory analysis.

Author:Felici, Francesco
 
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ABSTRACT

The Maastricht Treaty constraints imply a continuous control of the Public Administration (PA) deficit: so there has been an increasing demand for an efficient and effective public expenditure management, especially regarding PA wages (about 12% of Italy's GDP). The Ministry of Economy and Finances (MEF). PA Model forecasts wage dynamics on the basis of economic and normative hypotheses. The labor cost higher increments correspond to the wage settlement years, there is however a background dynamic pattern--more evident in the no wage settlement years--arising from decentralized wage bargaining, personnel seniority, promotions and professional qualifications changes. A homogeneous balanced panel extracted from the PA personnel yearly survey allows an in-depth study on wage distribution levels and dynamics. An important feature of such a study is the information synthesis on each observation average wage by two index numbers--a quantity index of Laspeyres type and a price or wage index of Paasche type--so defined as to jointly measure levels and dynamics of two observation-specific effects. a share, based on the personnel qualifications structure (weighed with a given average national wage), a shift, based on average wages dynamic (weighed with observation-specific personnel qualifications structure).

  1. INTRODUCTION

    Since the Maastricht Treaty constraints imply a continuous control of the Public Administration (PA) deficit, there has been an increasing demand for an efficient and effective public expenditure management, especially regarding PA wages (about 12% of the GDP). The PA model developed at the Ragioneria Generale dello Stato (RGS; Ministero dell'Economia e Finanze) simulates wage dynamics on the basis of the last realized levels and a set of economic and normative hypotheses (expected inflation, wage settlements, etc.; Venanzoni e Zaghini, 1992). The narrow model dimensions do not permit subnational forecasts; local wage dynamics, not always checked by the Central Government, may however vary over time and influence the General public deficit, which is a Central Government's competence. Moreover the model is mainly based on institutional factors and relations; it is therefore difficult to identify the effects of systematic forecasting errors by model's past performance. The likely clash between centralized constraints and decentralized dynamics is doomed to grow as a consequence of fiscal federalism and public functions decentralization.

    Such features are especially relevant for the National Health Service (NHS), due to its intrinsic institutional complexity (Venanzoni, 1994) and the sub-national segmentation of the operational units (local health authorities, hospitals, etc.). The importance of the NHS labor costs (19% of the total Public Sector and over 2,2% of the GDP) requires...

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