Employment sector and pay gaps: Genetic and environmental influences
This paper uses data on Finnish twins to examine two questions regarding public sector labour markets. First, what are the genetic and environmental contributions to being a public sector employee, and second, are there wage gaps between public and private sector employees. The results indicate that 34 to 40% of the observed variance in the tendency to be a public sector employee can be attributed to genetic factors, with no influence of the shared environment. Furthermore, at least one-third of the genetic variance is mediated through educational attainment. The results from the wage gap analysis suggest that OLS estimates are downward biased. In fact, while OLS estimates indicate a negative wage gap for both males (seven per cent) and females (four per cent), the within-twin estimates do not indicate any inequalities with respect to pay offered by the two sectors.
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