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Public Sector Pay in Finland

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  • Monojit Chatterji
  • Terhi Maczulskij
  • Jaakko Pehkonen

Abstract

This study analyses the forces determining public and private sector pay in Finland. The data used is a 7 per cent sample taken from the Finnish 2001 census. It contains information on 42 680 male workers, of which 8 759 are employed in public and 33 921 in the private sector. The study documents and describes data by education, occupation and industry. We estimate earnings equations for the whole sample as well as for four industries (construction, real estate, transportation and health) that provide an adequate mix of both public and sector workers. The results suggest that the private-public sector pay gap of about one per cent can be accounted for by differences in observable characteristics between the sectors (3.4 per cent) and lower returns from these characteristics (-2.3 per cent). However, the industry-level analysis indicates that the earnings gaps vary across industries, and are negative in some cases. These inter-industry differences in public-private gaps persist even when the usual controls are introduced. This suggests that public sector wage setters need greater local flexibility, which should result in less uniform wages within the public sector.

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Bibliographic Info

Paper provided by Economic Studies, University of Dundee in its series Dundee Discussion Papers in Economics with number 213.

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Length: 33 pages
Date of creation: Jul 2008
Date of revision:
Handle: RePEc:dun:dpaper:213

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Keywords: earnings; public sector; private sector; earnings; wage gap;

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References

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  1. Claudio Lucifora & Dominique Meurs, 2004. "The Public Sector Pay Gap in France, Great Britain and Italy," CHILD Working Papers wp04_04, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  2. Aysit Tansel, 1999. "Public-Private Employment Choice, Wage Differentials and Gender in Turkey," Working Papers 9913, Economic Research Forum, revised May 1999.
  3. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
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  5. Richard Disney & Amanda Gosling, 1998. "Does it pay to work in the public sector?," Fiscal Studies, Institute for Fiscal Studies, vol. 19(4), pages 347-374, November.
  6. David Prescott & Bo Wandschneider, 1999. "Public/private sector wage differentials in Canada-evidence from the 1991 and 1982 surveys of consumer finance," Applied Economics, Taylor & Francis Journals, vol. 31(6), pages 723-731.
  7. Lokshin, Michael M. & Jovanovic, Branko, 2003. "Wage differentials and state-private sector employment choice in the Federal Republic of Yugoslavia," Policy Research Working Paper Series 2959, The World Bank.
  8. Heitmueller, Axel, 2004. "Public-Private Sector Wage Differentials in Scotland: An Endogenous Switching Model," IZA Discussion Papers 992, Institute for the Study of Labor (IZA).
  9. Lassibille, Gerard, 1998. "Wage Gaps Between the Public and Private Sectors in Spain," Economics of Education Review, Elsevier, vol. 17(1), pages 83-92, February.
  10. Budria, Santiago, 2006. "Schooling and the distribution of wages in the european private and public sectors," MPRA Paper 90, University Library of Munich, Germany.
  11. Christofides, Louis N. & Pashardes, Panos, 2002. "Self/paid-employment, public/private sector selection, and wage differentials," Labour Economics, Elsevier, vol. 9(6), pages 737-762, December.
  12. Aysit Tansel, 1999. "Public-Private Employment Choice, Wage Differentials and Gender in Turkey," Working Papers 797, Economic Growth Center, Yale University.
  13. Adamchik, Vera A. & Bedi, Arjun S., 2000. "Wage differentials between the public and the private sectors: evidence from an economy in transition," Labour Economics, Elsevier, vol. 7(2), pages 203-224, March.
  14. Blackaby, D. H. & Murphy, P. D. & O'Leary, N. C., 1999. "The payment of public sector workers in the UK: reconciliation with North American findings," Economics Letters, Elsevier, vol. 65(2), pages 239-243, November.
  15. Stephen Nickell & Glenda Quintini, 2002. "The Consequences of The Decline in Public Sector Pay in Britain: A Little Bit of Evidence," Economic Journal, Royal Economic Society, vol. 112(477), pages F107-F118, February.
  16. Evangelia Papapetrou, 2006. "The unequal distribution of the public-private sector wage gap in Greece: evidence from quantile regression," Applied Economics Letters, Taylor & Francis Journals, vol. 13(4), pages 205-210.
  17. Holmlund, B. & Ohlsson, H., 1990. "Wage Linkages Between Private and Public Sectors," Papers 1990t, Uppsala - Working Paper Series.
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