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A Switching Regression Model for Wage Determinants in the Public and Private Sectors of a Developing Country

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  • van der Gaag, Jacques
  • Vijverberg, Wim

Abstract

Governments in less developed countries face severe budgetary constraints. Given that public sector employment is a large part of modern sector employment, the government wage bill h as come under increased scrutiny. The central question is how do gove rnment wages compare with those in the private sector? In this paper, the authors develop and estimate a model to answer this question. An important aspect of this model is the endogenous treatment of sector choice. The estimation results (full information maximum likelihood) sound a strong warning against the use of ordinary least squares est imates that are based on sector-specific samples. Data are from the I vory Coast. Copyright 1988 by MIT Press.

Suggested Citation

  • van der Gaag, Jacques & Vijverberg, Wim, 1988. "A Switching Regression Model for Wage Determinants in the Public and Private Sectors of a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 244-252, May.
  • Handle: RePEc:tpr:restat:v:70:y:1988:i:2:p:244-52
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