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Evolution of the Public-Private Sector Wage Differential during Transition in Estonia

  • Kristjan-Olari Leping

This article estimates the public-private sector wage differential in Estonia over the transition period. Quantile regression is used with a dataset from Estonian Labour Force Surveys from 1989 to 2004 for this purpose. The results of the analysis indicate that the public-private sector wage differential was negative during early transition but has decreased subsequently. It also shows that employees with low potential wages tend to gain more or lose less from working in the public sector than workers with high potential wages. The public-private sector wage differential is negatively related to the number of public employees and tends to be counter-cyclical. Political cycles have no effect on the public-private sector wage differential in Estonia.

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Article provided by Taylor & Francis Journals in its journal Post-Communist Economies.

Volume (Year): 18 (2006)
Issue (Month): 4 ()
Pages: 419-436

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Handle: RePEc:taf:pocoec:v:18:y:2006:i:4:p:419-436
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  1. Daniel Munich & Jan Svejnar & Daniel Munich, 1999. "Returns to Human Capital under the Communist Wage Grid and During the Transition to a Market Economy," William Davidson Institute Working Papers Series 272, William Davidson Institute at the University of Michigan.
  2. Adamchik, Vera A. & Bedi, Arjun S., 2000. "Wage differentials between the public and the private sectors: evidence from an economy in transition," Labour Economics, Elsevier, vol. 7(2), pages 203-224, March.
  3. Tito Boeri & Katherine Terrell, 2001. "Institutional Determinants of Labor Reallocation in Transition," William Davidson Institute Working Papers Series 384, William Davidson Institute at the University of Michigan.
  4. Lucifora, Claudio & Meurs, Dominique, 2004. "The Public Sector Pay Gap in France, Great Britain and Italy," IZA Discussion Papers 1041, Institute for the Study of Labor (IZA).
  5. Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, vol. 30(2), pages 505-520, 09.
  6. Morton Stelcner & Jacques van der Gaag & Wim Vijverberg, 1989. "A Switching Regression Model of Public-Private Sector Wage Differentials in Peru: 1985-86," Journal of Human Resources, University of Wisconsin Press, vol. 24(3), pages 545-559.
  7. Kristjan-Olari Leping, 2005. "Public-Private Sector Wage Differential In Estonia: Evidence From Quantile Regression," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 39, Faculty of Economics and Business Administration, University of Tartu (Estonia).
  8. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  9. Mueller, Richard E., 1998. "Public-private sector wage differentials in Canada: evidence from quantile regressions," Economics Letters, Elsevier, vol. 60(2), pages 229-235, August.
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