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Pre-crisis reforms, austerity measures and the public-private wage gap in two emerging economies

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  • Nikolic, Jelena
  • Rubil, Ivica
  • Tomić, Iva

Abstract

This paper analyzes crisis adjustments of the public and private sectors in two emerging market economies, Croatia and Serbia, during the 2008–2011 period. It focuses on public-private wage gaps at the onset of and during the crisis, decomposed into structural and composition effects using an extension to the Oaxaca-Blinder method based on Recentered Influence Function (RIF) regressions and reweighting. The main results indicate that at the beginning of the crisis public sector workers in both countries enjoyed a significant wage premium, with the premium in Serbia being about three times higher than in Croatia. During the crisis, both countries experienced a similar increase of the premium, with Croatia reaching the size of gap usually estimated for EU countries, while Serbia stayed largely ahead. The results also show that the wage distribution in the public sector is more compressed than in the private sector in both countries, which is further exacerbated by the crisis. Despite the introduced austerity measures, public sector workers continue to enjoy well-protected and privileged jobs in terms of wages relative to their private sector counterparts. Structural reforms undertaken prior to the crisis played a decisive role in determining the countries’ responses to the crisis.

Suggested Citation

  • Nikolic, Jelena & Rubil, Ivica & Tomić, Iva, 2017. "Pre-crisis reforms, austerity measures and the public-private wage gap in two emerging economies," Economic Systems, Elsevier, vol. 41(2), pages 248-265.
  • Handle: RePEc:eee:ecosys:v:41:y:2017:i:2:p:248-265
    DOI: 10.1016/j.ecosys.2016.06.001
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    References listed on IDEAS

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    Cited by:

    1. Iva Tomic & Ivan Zilic, 2018. "Working for 200 euro? The effects of traineeship reform on labor market outcomes in Croatia," Working Papers 1804, The Institute of Economics, Zagreb.
    2. Gimpelson, Vladimir & Lukiyanova, Anna & Sharunina, Anna, 2019. "Economics and Politics of the Public-Private Wage Gap (The Case of Russia)," IZA Discussion Papers 12247, Institute of Labor Economics (IZA).

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