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Wage differentials and state-private sector employment choice in Yugoslavia

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  • Michael M. Lokshin
  • Branko Jovanovic

Abstract

In this study we use the newly available Yugoslavian Labor Force Survey data to investigate wage differentials and employment decisions in the state and private sectors in Yugoslavia. For the analysis we use three empirical models that rely on different statistical assumptions. We extend the standard switching regression model to allow non-normality in the joint distribution of the error terms. After correcting for the sector selection bias and controlling for workers' characteristics we find a private sector wage advantage. The wage premium is largest for workers with low education levels and declining for workers with higher educational levels. Given the regulatory and tax policies that pushed the private sector into the informal sphere of the economy during the period covered by our data, we argue that the state/private wage gap is likely to grow in the future. This will make it increasingly difficult for the state sector to attract and retain highly skilled employees. Copyright (c) The European Bank for Reconstruction and Development, 2003..

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal The Economics of Transition.

Volume (Year): 11 (2003)
Issue (Month): 3 (09)
Pages: 463-491

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Handle: RePEc:bla:etrans:v:11:y:2003:i:3:p:463-491

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Cited by:
  1. Alejandra Mizala & Pilar Romaguera & Sebastian Gallegos, 2010. "Public-Private Wage Gap In Latin America (1999-2007): A Matching Approach," Documentos de Trabajo 268, Centro de Economía Aplicada, Universidad de Chile.
  2. Gorodnichenko, Yuriy & Sabirianova, Klara, 2006. "Public Sector Pay and Corruption: Measuring Bribery from Micro Data," CEPR Discussion Papers 5585, C.E.P.R. Discussion Papers.
  3. Juan Yang & Sylvie Demurger & Shi Li, 2011. "Do Employees in the Public Sector Still Enjoy Earnings Advantages?," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 201118, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
  4. Démurger, Sylvie & Li, Shi & Yang, Juan, 2012. "Earnings differentials between the public and private sectors in China: Exploring changes for urban local residents in the 2000s," China Economic Review, Elsevier, vol. 23(1), pages 138-153.
  5. Kar, Saibal & Roy, Poulomi & Saha, Sarani, 2012. "Public and Private Sector Jobs, Unreported Income and Consumption Gap in India: Evidence from Micro-Data," IZA Discussion Papers 6404, Institute for the Study of Labor (IZA).
  6. Kosovka Ognjenović, 2011. "Wage Differences between the Private and the Public Sector in Serbia: Some Evidence from Survey Data," wiiw Balkan Observatory Working Papers 91, The Vienna Institute for International Economic Studies, wiiw.

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