Public Wage Spillovers. Identification from a Large and Unexpected Public Wage Increase.

Using a large and unexpected public wage increase in Hungary, which changed the public wage premium from -11 to +15 percent, I identify wage spillovers from the public to the corporate sector, using the variation of the share of public sector employment within labor market segments defined by gender, experience and occupation. Controlling for firm, labor market segment, and worker-firm fixed effects, the analysis finds that 10 percent higher share of public sector workers within labor market segment induces faster corporate wage growth by 8-11 percent around the wage increase.