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Higher wages, lower pay : public vs. private sector compensation in Peru

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  • Coppola, Andrea
  • Calvo-Gonzalez, Oscar

Abstract

Do public sector employees earn less than their counterparts in the private sector? This paper addresses this question in the case of Peru, a country where civil service reform is being debated yet the only available empirical studies on wage differentials date back to the late 1980s. Using data from the 2009 national household survey, the authors perform a multiple step analysis. First, they estimate a single equation with a public sector dummy, which is found to be statistically significant and positive when only monetary wages are taken into account. However, when in-kind payments and bonuses are included to measure compensation, the analysis finds a private sector premium. Second, they estimate for public and formal private employees two distinct wage functions, including the inverse Mills ratio. This takes into account the selection bias resulting from workers self-selecting into the public or private sector. Third, these results are used to decompose wage differentials using the standard Oaxaca-Blinder approach. The results show that the compensation differentials are not significant except for the sub-sample of employees that achieved a postgraduate degree.

Suggested Citation

  • Coppola, Andrea & Calvo-Gonzalez, Oscar, 2011. "Higher wages, lower pay : public vs. private sector compensation in Peru," Policy Research Working Paper Series 5858, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5858
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    References listed on IDEAS

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    Cited by:

    1. Gindling, T.H. & Hasnain, Zahid & Newhouse, David & Shi, Rong, 2020. "Are public sector workers in developing countries overpaid? Evidence from a new global dataset," World Development, Elsevier, vol. 126(C).
    2. Juan Manuel del Pozo Segura, 2017. "Has the Gender Wage Gap been Reduced during the 'Peruvian Growth Miracle?' A Distributional Approach," Documentos de Trabajo / Working Papers 2017-442, Departamento de Economía - Pontificia Universidad Católica del Perú.

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    Keywords

    Labor Markets; Public Sector Economics; Inequality; Public Sector Management and Reform; Education and Digital Divide;
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