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Public Sector Pay Gaps and Skill Levels: a Cross-Country Comparison

Author

Listed:
  • Paolo Ghinetti
  • Claudio Lucifora

    (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)

Abstract

In this study, we investigate public-private pay determination using French, British and Italian micro data from the 2001 ECHP. We document that the distribution of wages is very different between public and private workers. As a result, the public pay premium varies as one moves up or down in the wage distribution. In France, Great Britain and Italy the public sector wage premium is higher for low skilled public sector workers, whilst the opposite happens for high skilled workers. These effects are more pronounced in the service sector. Additional results suggest that if a worker with certain characteristics was exogenously moved from the public to the private sector, he suffered a welfare (wage) loss, which is higher for the low skilled, who are the most protected in the public sector. In the light of the privatisation process of formerly public service, this process may in general impose some cost to involved public employees. Moreover, such costs are decreasing with the level of wages. Finally, the magnitude of these costs depend on the country considered, and, hence on the associated institutional setting.

Suggested Citation

  • Paolo Ghinetti & Claudio Lucifora, 2008. "Public Sector Pay Gaps and Skill Levels: a Cross-Country Comparison," Working Papers 118, SEMEQ Department - Faculty of Economics - University of Eastern Piedmont.
    • Handle: RePEc:upo:upopwp:118
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    File URL: http://semeq.unipmn.it/files/pspg.pdf
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    References listed on IDEAS

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    1. Robert Elliott & Claudio Lucifora & Dominique Meurs, 1999. "Public Sector Pay Determination in the European Union: Issues and Outcomes," Palgrave Macmillan Books, in: Robert Elliott & Claudio Lucifora & Dominique Meurs (ed.), Public Sector Pay Determination in the European Union, chapter 1, pages 1-28, Palgrave Macmillan.
    2. Carlo Dell'Aringa & Claudio Lucifora & Federica Origo, 2007. "Public Sector Pay And Regional Competitiveness. A First Look At Regional Public–Private Wage Differentials In Italy," Manchester School, University of Manchester, vol. 75(4), pages 445-478, July.
    3. Stephen Bazen & Mary Gregory & Wiemer Salverda (ed.), 1998. "Low-Wage Employment in Europe," Books, Edward Elgar Publishing, number 1612.
    4. Robert Elliott & Claudio Lucifora & Dominique Meurs (ed.), 1999. "Public Sector Pay Determination in the European Union," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-14946-9, December.
    5. 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.
    6. Stephen Nickell & Glenda Quintini, 2003. "Nominal wage rigidity and the rate of inflation," Economic Journal, Royal Economic Society, vol. 113(490), pages 762-781, October.
    7. Claudio Lucifora & Dominique Meurs, 2006. "The Public Sector Pay Gap In France, Great Britain And Italy," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(1), pages 43-59, March.
    8. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    9. Carlo Dell’Aringa & Nicole Lanfranchi, 1999. "Pay Determination in the Public Service: An International Comparison," Palgrave Macmillan Books, in: Robert Elliott & Claudio Lucifora & Dominique Meurs (ed.), Public Sector Pay Determination in the European Union, chapter 2, pages 29-69, Palgrave Macmillan.
    10. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
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    13. James M. Poterba & Kim S. Rueben, 1994. "The Distribution of Public Sector Wage Premia: New Evidence Using Quantile Regression Methods," NBER Working Papers 4734, National Bureau of Economic Research, Inc.
    14. Claudio Lucifora, 1999. "Rules vs. Bargaining: Pay Determination in the Italian Public Sector," Palgrave Macmillan Books, in: Robert Elliott & Claudio Lucifora & Dominique Meurs (ed.), Public Sector Pay Determination in the European Union, chapter 5, pages 138-190, Palgrave Macmillan.
    15. Keith A. Bender & Robert Elliott, 1999. "Relative Earnings in the UK Public Sector: The Impact of Pay Reform on Pay Structure," Palgrave Macmillan Books, in: Robert Elliott & Claudio Lucifora & Dominique Meurs (ed.), Public Sector Pay Determination in the European Union, chapter 8, pages 285-339, Palgrave Macmillan.
    16. Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, vol. 30(2), pages 505-520, September.
    17. Yves Guillotin & Dominique Meurs, 1999. "Wage Heterogeneity in the French Public Sector: Some First Insights," Palgrave Macmillan Books, in: Robert Elliott & Claudio Lucifora & Dominique Meurs (ed.), Public Sector Pay Determination in the European Union, chapter 3, pages 70-113, Palgrave Macmillan.
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    Cited by:

    1. Tansel, Aysit & Keskin, Halil Ibrahim & Ozdemir, Zeynel Abidin, 2008. "Public versus Private Sector Wage Gap in Egypt: Evidence from Quantile Regression on Panel Data," MPRA Paper 89540, University Library of Munich, Germany.
    2. Dickson, Matt & Postel-Vinay, Fabien & Turon, Hélène, 2014. "The lifetime earnings premium in the public sector: The view from Europe," Labour Economics, Elsevier, vol. 31(C), pages 141-161.
    3. repec:hal:spmain:info:hdl:2441/1frfnu9k0921o6s94ptnm0q4o is not listed on IDEAS
    4. Barigozzi, Francesca & Parasnis, Jaai & Tani, Massimiliano, 2022. "Gender, Motivation, and Self-Selection into Teaching," IZA Discussion Papers 15532, Institute of Labor Economics (IZA).
    5. Tansel, Aysit & Keskin, Halil Ibrahim & Ozdemir, Zeynel Abidin, 2008. "Public versus Private Sector Wage Gap in Egypt: Evidence from Quantile Regression on Panel Data," MPRA Paper 89540, University Library of Munich, Germany.
    6. Tepe, Markus, 2010. "The effect of reciprocal motives, personality traits and wage differnences on public employee's job satisfaction," TranState Working Papers 131, University of Bremen, Collaborative Research Center 597: Transformations of the State.

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    More about this item

    Keywords

    Wage differentials; Public sector; Quantile regression;
    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
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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