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Sectoral Impacts of Public Expenditures on Real Wages: Evidence from Brazilian States

Author

Listed:
  • Jo?o Paulo Rios e Silva

    (MAER, Federal University of Cear¨¢, BRAZIL)

  • Elano Ferreira Arruda (Correspondence Author)

    (DEA/MAER/CAEN, Federal University of Cear¨¢, BRAZIL)

  • Felipe de Sousa Bastos

    (CAEN, Federal University of Cear¨¢, BRAZIL)

  • Pablo Urano de Carvalho Castelar

    (Finance Course, Federal University of Cear¨¢, BRAZIL)

Abstract

This work analyzes the sectoral impacts of public spending on real wages in Brazilian states. A panel covering the period of 1995-2014 for Brazilian states is used, with information on public expenditures, gross domestic product and average real wages in seven sectors of activity, with impulse response functions extracted from panel VAR models. The sectors analyzed are Agriculture, Plant Extraction, Hunting and Fishing, Services, Commerce, Construction, Manufacturing, Public Utility Services and Mineral Extraction. The sectoral analysis is relevant given the possibility of asymmetries in real wage responses to fiscal policy in different sectors. From this exercise, it is possible to make inferences about the labor market in these sectors in Brazil, and infer if the outcomes are similar to those found in the Real Business Cycles tradition, i.e., with negative responses of real wages to shocks in the budget spending of states, or if the fiscal shocks increase real wages, as observed in the New Keynesian models. The evidence suggests that both GDP and real wages respond positively to shocks in public spending in all sectors analyzed and that these impacts are greater in the states in the South, Southeast and Midwest regions of Brazil.

Suggested Citation

  • Jo?o Paulo Rios e Silva & Elano Ferreira Arruda (Correspondence Author) & Felipe de Sousa Bastos & Pablo Urano de Carvalho Castelar, 2018. "Sectoral Impacts of Public Expenditures on Real Wages: Evidence from Brazilian States," Review of Economics & Finance, Better Advances Press, Canada, vol. 14, pages 55-70, November.
    • Handle: RePEc:bap:journl:180405
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    More about this item

    Keywords

    Public expenditures; Labor market; Panel VAR; Impulse response function; Brazilian states;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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