Using information from all International Monetary Fund conditionality programmes from 1990 to 2018, we implement a dynamic Augmented Inverse Probability Weighting Regression Adjustment approach to enquire whether public-sector employment retrenchment may be incompatible with the goal of shrinking the informal economy. The estimated effect 5 years after the policy intervention indicates an increase in the share of the shadow economy to GDP by about 1.3 percentage points. More importantly, this change involves a sizable reallocation of private economic activity from its formal to its informal part; that is, the size of the formal private sector relative to the size of the informal sector decreases by seven percentage points. We interpret these findings through a two-sector model in which there is interdependence between worker incomes and the allocation of product demand across the formal and informal sectors.

In many countries, the structure of wages and the labor law legislation are completely different for public and private sector employees. In this paper, we develop a general equilibrium overlapping generations model to study the effect of such differences on household savings and labor supply. To conduct our analysis, first we use microdata from two Brazilian household surveys to document that civil servants save and work significantly less than their counterparts in the private sector. Second, we use matched employer–employee microdata from Brazil (RAIS) to document differences between the two sectors in terms of wage and unemployment risk. Then, we calibrate the model to be consistent with micro and macro evidence for Brazil. Our counterfactual exercises show that differences in wages characteristics and labor law legislation account for nearly 70% of the gap in savings between civil servants and private sector workers, and 57% of the gap in labor supply. In addition, we find that eliminating those differences can produce sizable increase on aggregate savings, employment, and welfare.

In the period leading up to the federal government’s May 2009 announcement of a paid parental leave scheme, there was a surge in community and media debate about the absence of such a scheme in Australia. This article explores whether this context had some bearing on bargaining outcomes during that time. We analyse data from the Australian Workplace Agreements Database to determine the incidence and length of paid parental leave in collective agreements registered between 2005 and 2010. The results show an increase in the number of agreements that included paid parental leave clauses in the period, with just over 14% of all current agreements including a paid parental leave clause by 2010. Moreover, 18% of all agreements lodged in 2010 included a paid parental leave clause, suggesting an increase in bargaining outcomes over time. We also find a slight increase in the average duration of paid parental leave in collective agreements. A leave of 14 weeks is most common in public sector agreements but less than 3% of agreements in the private sector provide for 14 weeks or more. These marked differences between the public and private sectors suggest minimal change in private sector bargaining outcomes. We conclude that the legislative context does influence bargaining outcomes, but that this effect is felt more in public sector than private sector bargaining.

Australian policy on paid parental leave (PPL) has been highly controversial in recent years. While a universal PPL scheme become operative in 2011 under the Australian Labor Party, alternative policies continued to be proposed by the leader of the Liberal Party. These ranged from an expanded, comparatively generous PPL scheme, to one which would maintain the status quo, to a scheme with lesser provisions than are currently available. This article examines the PPL policy which would have provided the most generous entitlements to employees, and considers how public servants may have fared had it been introduced. The proposal would have meant that public servants would no longer have been able to access PPL provisions in their industrial instruments, but would only have been entitled to the legislated provisions. This article assesses whether public servants may have gained or lost under such a change, and then considers the broader issue of the most appropriate avenues to regulate public sector employment conditions. While a rare opportunity for enhanced PPL has been lost, this may be the best outcome in ensuring that unions can continue to bargain collectively for this important provision and ongoing improvements to it.