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The Public Earnings Premium in a Mineral Rich Economy: New Piece in the Puzzle

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  • Usamah Alfarhan

    (Department of Economics and Finance, Sultan Qaboos University)

Abstract

This paper addresses the determination of sector earnings and the public earnings premium in Saudi Arabia. It uses a primary cross section of individuals collected in 2013, and employs the Oaxaca-Blinder decomposition methodology to show whether the observed sectoral earnings' differential is explained by differences in workers' characteristics or by a favorable public wage structure. While controlling for selection, the paper shows that public workers are better endowed rather than overpaid by a wealthy state. This finding suggests that, contrary to the general belief, the determination of public earnings does not contradict active labor market policies designed to encourage private sector employment of locals.

Suggested Citation

  • Usamah Alfarhan, 2015. "The Public Earnings Premium in a Mineral Rich Economy: New Piece in the Puzzle," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 3(1), pages 12-27, February.
    • Handle: RePEc:lrc:lareco:v:3:y:2015:i:1:p:12-27
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    More about this item

    Keywords

    Earnings' differentials; Public/private sector earnings; Selection.;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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