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Wage Differentials, Rate of Return toEducation, and Occupational WageShare in the Labour Market of Pakistan

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  • Hyder, Asma

Abstract

This paper examines the magnitude of public/private wage differentials in Pakistan using data drawn from the 2001-02 Labour Force Survey. Pakistan Labour Force Survey is a nationwide survey containing micro data from all over the country containing demographic and employment information. As in many other countries, public sector workers in Pakistan tend to have higher average pay and educational levels as compared to their private sector counterparts. First, this paper presents the inter-sectoral earning equations for the three main sectors of the economy, i.e., public, private, and state-owned enterprises. These results are further decomposed into “treatment” and “endowment effect”. To examine the role of human capital in wage gap, the rate of return to different levels of schooling is calculated. These rates of return to education may be important for policy formulation. The relative earning share is also worked out to look into the distribution of wages across the occupational categories. The earning equations are estimated with and without correction for selectivity, which is also the main objective of the study, i.e., to find out if any non-random selection is taking place within these three sectors of employment.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2224.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:2224

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Keywords: Wage Differentials; Rate of Return to Education; Public Sector; Labour Markets;

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References

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  1. Psacharopoulos, George, 1993. "Returns to investment in education : a global update," Policy Research Working Paper Series 1067, The World Bank.
  2. Taye Mengistae, 1998. "Wage rates and job queues: does the public sector overpay in Ethiopia?," CSAE Working Paper Series 1998-20, Centre for the Study of African Economies, University of Oxford.
  3. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, Econometric Society, vol. 56(2), pages 259-93, March.
  4. Rebecca M. Blank, 1993. "Public Sector Growth and Labor Market Flexibility: The United States vs. The United Kingdom," NBER Working Papers 4339, National Bureau of Economic Research, Inc.
  5. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  6. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521608275.
  7. Gindling, T H, 1991. "Labor Market Segmentation and the Determination of Wages in the Public, Private-Formal, and Informal Sectors in San Jose, Costa Rica," Economic Development and Cultural Change, University of Chicago Press, University of Chicago Press, vol. 39(3), pages 584-605, April.
  8. Rebecca M. Blank, 1994. "Social Protection versus Economic Flexibility: Is There a Trade-Off?," NBER Books, National Bureau of Economic Research, Inc, number blan94-1, July.
  9. Terrell, Katherine, 1993. "Public-private wage differentials in Haiti Do public servants earn a rent?," Journal of Development Economics, Elsevier, Elsevier, vol. 42(2), pages 293-314, December.
  10. van der Gaag, Jacques & Vijverberg, Wim, 1988. "A Switching Regression Model for Wage Determinants in the Public and Private Sectors of a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 244-52, May.
  11. Asma Hyder & Barry Reilly, 2005. "The Public and Private Sector Pay Gap in Pakistan: A Quantile Regression Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, Pakistan Institute of Development Economics, vol. 44(3), pages 271-306.
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Cited by:
  1. Muhammad Arshad Khan, 2007. "Foreign Direct Investment and Economic Growth: The Role of Domestic Financial Sector," PIDE-Working Papers, Pakistan Institute of Development Economics 2007:18, Pakistan Institute of Development Economics.
  2. Abdul Qayyum & Idrees Khawaja & Asma Hyder, 2008. "Growth Diagnostics in Pakistan," PIDE-Working Papers, Pakistan Institute of Development Economics 2008:47, Pakistan Institute of Development Economics.
  3. Harry Patrinos & Cristobal Ridao-Cano & Chris Sakellariou, 2009. "A note on schooling and wage inequality in the public and private sector," Empirical Economics, Springer, Springer, vol. 37(2), pages 383-392, October.

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