The monthly hirings series of state owned firms as

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The monthly hirings series of state-owned firms (as defined above) are presented in Figure1. The figure also highlights the three-month periods immediately after a new governmenttakes office (and the cases when the new government is of a different political colour thanits predecessor in dark grey), in accordance with Table 1.There are clear examples of anoverlap between a spike in hirings and such three-month periods, namely in late 1985/early1986, mid 2002 and mid 2005, all of them coinciding with governments of a different politicalcolour.In fact, there are fewer examples of overlap between new governments of the samepolitical colour as their predecessors and spikes in hirings (e.g. 1981, late 1999/early 2000)and those cases are of smaller magnitudes. Figure 2 complements the information above bydepicting the monthly hirings of both state-owned and private firms. One finds some overlapbetween spikes in hirings of the two groups of firms and the periods after elections - e.g in late1985/early 1986. On the other hand, we observe the opposite, i.e. a negative spike in privatehirings during the period just after the general election in late 1995.Overall, we interpret the eyeball evidence above as encouraging as to the scope for thepolitical cycle to drive hirings of state-owned firms, either when taken in isolation or whenconsidering the contrast between state-owned and private firms. Section 5 will subject thesesuggestive findings to more precise statistical tests.4.2Wage differentialsBefore presenting our main results, we take a brief detour to shed some light on the wage dif-ferences between private and state-owned firms in Portugal. In particular, we estimate simplewage equations augmented with a state-owned dummy, to assess empirically the magnitude of10These new firms include the creation of organisations that, until recently, would only be staffed by publicservants and therefore would be left out from ‘Quadros de Pessoal’ but that now hire employees whose labouris regulated by the same laws as other private-sector workforce, while before they only employed civil servants(e.g. hospitals). New municipal-level public firms can also feature.14
the wage differential (Postel-Vinay & Turon 2007). We draw on the same version of ‘Quadrosde Pessoal’ as described above, including all state-owned firms and a sample of private firms,from 1986 to 2008. The difference with respect to the rest of the paper is that in this casewe consider all employees and not only the newly hired as above and in the remaining of thepaper.The richness of the data - including worker and firm identifiers - allow us to include differentsets of controls, including worker and firm time-invariant heterogeneity (worker identifiers areavailable only from 1986).The results under different specifications of the wage equation,are presented in Table 5.We find state-owned premiums of above 15% in the first twospecifications, which control for schooling, quadratics in experience and tenure, gender, firmsize, and year dummies.Moreover, this premium also holds for the subset of newly-hired

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