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(Why) Is There a Public/Private Pay Gap?

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  • Makridis, Christos A.

Abstract

The government is facing a severe shortage of skilled workers. The conventional wisdom in branches of policy and public administration is that the shortage is driven by low salaries that are not competitive for attracting top talent. Using longitudinal data on high skilled workers between 1993 and 2013, this paper shows that, if anything, government employees earn more than their private sector counterparts. Although government workers tend to earn less in the raw data, these differences are driven by the correlation between unobserved productivity and selection into private sector jobs. Instead, this paper provides empirical evidence that low non-pecuniary amenities, such as development opportunities and management, can explain earnings differences between the public and private sectors.

Suggested Citation

  • Makridis, Christos A., 2021. "(Why) Is There a Public/Private Pay Gap?," Journal of Government and Economics, Elsevier, vol. 1(C).
    • Handle: RePEc:eee:jogoec:v:1:y:2021:i:c:s2667319321000021
    DOI: 10.1016/j.jge.2021.100002
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    Citations

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    Cited by:

    1. Christos A. Makridis & Barry T. Hirsch, 2021. "The Labor Market Earnings of Veterans: Is Military Experience More or Less Valuable than Civilian Experience?," Journal of Labor Research, Springer, vol. 42(3), pages 303-333, December.
    2. Makridis, Christos A. & McGuire, Erin, 2023. "The quality of innovation “Booms” during “Busts”," Research Policy, Elsevier, vol. 52(1).
    3. Cristina Pita & Ramón J. Torregrosa, 2023. "The Education-Job Satisfaction Paradox in the Public Sector," Public Organization Review, Springer, vol. 23(4), pages 1717-1735, December.

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