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Compensating Differentials and the Queue For Public Sector Jobs: Evidence from Egyptian Household Survey Data

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  • Mona Said

    (Department of Economics, SOAS University of London, UK)

Abstract

This Paper considers the determinants of male and female pay in the public and private sectors by estimating a joint model of sector allocation and wage determination using cross-sectional data from the Egyptian 1987 and 1997 labour force surveys. The results points to the profound impact of the graduate public sector employment guarantee on labour market segmentation in Egypt. In particular, the level of educational attainment became the most important factor in sorting workers between sectors. Comparison of the 1987 and 1997 results highlight that the strong impact of the public sector employment guarantee on the labour market in the 1980s was weakened in the 1990s for males but remains important for females. Moreover, risk-averse individuals (proxied by those who have greater financial responsibility in their households) have a greater probability of choosing public sector than private sector employment. These results are consistent with the effective operation of the guarantee for more highly educated workers and with time based queuing for guaranteed positions. A model of compensating wage differentials is then defined and estimated, in order to quantify the value of arguably the three most important non-pecuniary aspects of public sector employment: job security, fringe benefits (especially comprehensive retirement pensions) and lower effort and shorter hours which allow workers to supplement income through obtaining a second job. Estimates of the publicprivate differentials, correcting for differences in characteristics and selectivity, indicate a public sector disadvantage for males and a small advantage for females in 1987. Relative public sector wages improved for both males and females in 1997, and when adjustments for non-wage benefits are included, public sector premia are observed in all segments of the public sector for both males and females. It also emerged that the single most important adjustment factor leading to the change in the differential is the value of job stability, which drives up the differential in favour of the public sector, particularly in manufacturing. The results highlight the importance of job security as the major factor determining the persistence of queues for public sector jobs in Egypt.

Suggested Citation

  • Mona Said, 2004. "Compensating Differentials and the Queue For Public Sector Jobs: Evidence from Egyptian Household Survey Data," Working Papers 136, Department of Economics, SOAS University of London, UK.
    • Handle: RePEc:soa:wpaper:136
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    References listed on IDEAS

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    1. Mr. Alan A. Tait & Mr. Peter S. Heller, 1983. "Government Employment and Pay: Some International Comparisons," IMF Occasional Papers 1983/007, International Monetary Fund.
    2. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    3. Don Bellante & Albert N. Link, 1981. "Are Public Sector Workers More Risk Averse Than Private Sector Workers?," ILR Review, Cornell University, ILR School, vol. 34(3), pages 408-412, April.
    4. Terrell, Katherine, 1993. "Public-private wage differentials in Haiti Do public servants earn a rent?," Journal of Development Economics, Elsevier, vol. 42(2), pages 293-314, December.
    5. Don Bellante & Albert N. Link, 1982. "Worker Response to a Menu of Implicit Contracts," ILR Review, Cornell University, ILR School, vol. 35(4), pages 590-599, July.
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    Cited by:

    1. Hyder, Asma, 2007. "Wage Differentials, Rate of Return toEducation, and Occupational WageShare in the Labour Market of Pakistan," MPRA Paper 2224, University Library of Munich, Germany.
    2. Ahmed Fayez Abdelgouad, 2014. "Labor Law Reforms and Labor Market Performance in Egypt," Working Paper Series in Economics 314, University of Lüneburg, Institute of Economics.
    3. Asma Hyder, 2007. "Preference for Public Sector Jobs and Wait Unemployment: A Micro Data Analysis," PIDE-Working Papers 2007:20, Pakistan Institute of Development Economics.

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