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Reducing Public-Private Sector Pay Differentials: The Single Spine Pay Policy as a Natural Experiment in Ghana

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  • Akwasi Ampofo

    (School of Economics, University of Adelaide)

  • Firmin Doko Tchatoka

    (School of Economics, University of Adelaide)

Abstract

Empirical studies have documented the existence of the public-private pay differentials in both developed and developing countries. The implementation of policies aiming to reduce this gap has however been mitigated or inconclusive. This paper exploits the Single Spine Pay Policy (SSPP) in Ghana as a natural experiment to examine the effectiveness of wage policies in developing countries. The SSPP was implemented in 2010 by the Government of Ghana to address the public-private sector wage gap and improve productivity in the public sector. Using a quantile treatment effect approach based on a Difference-In-Difference (DID) estimation, we show that the SSPP has yet to reduce the wage gap between the public and private sectors across the entire distribution of earnings in Ghana. The improvement observed is only at the lower tail of the distribution of earnings. However, the SSPP has a larger effect on the earnings of female workers than that of males in the education and health services sector, suggesting that the policy was successful in reducing the gender-wage gap in that sector. Moreover, the SSPP has decreased the productivity of workers across the distribution of earnings, mainly due to a decrease in the effort of female public sector workers. Nevertheless, the SSPP has had some successes and could be improved by putting in place a good managerial quality in the government' agencies. In addition, it is important that the Government pays much attention to various macroeconomic factors that have challenged the success of the SSPP.

Suggested Citation

  • Akwasi Ampofo & Firmin Doko Tchatoka, 2018. "Reducing Public-Private Sector Pay Differentials: The Single Spine Pay Policy as a Natural Experiment in Ghana," School of Economics and Public Policy Working Papers 2018-02, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2018-02
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    1. Eréndira León Bravo, 2022. "Three essays on education, wages, and the labour market in Mexico," Economics PhD Theses 0322, Department of Economics, University of Sussex Business School.

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    More about this item

    Keywords

    Public sector; Efficiency wage theory; Quantile treatment effect model; DID estimation;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets

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