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Public-private wage differentials in euro area countries: evidence from quantile decomposition analysis

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  • Domenico Depalo

    () (Bank of Italy)

  • Raffaela Giordano

    () (Bank of Italy)

  • Evangelia Papapetrou

    () (Bank of Greece)

Abstract

We evaluate the public-private wage differential in ten euro area countries for men in the period 2004-2007. Using the most recent methodologies on a Mincerian equation, we assess how much of the pay differential between public and private sector workers depends on differences in endowments and how much on differences in the remuneration of such skills. For the first time, we look at the contribution of specific covariates at different quantiles of the wage distribution and decompose the variance into an explained and an unexplained component. We find that the pay gap is often decreasing over the distribution, and it is mostly determined by higher endowments in the upper tail of the wage distribution and by higher returns of such endowments at the low tail, with considerable heterogeneity across countries. We further find that the wage distribution in the public sector is more compressed than in the private sector in some countries but not in all countries. This is the results, for all countries, of more dispersed distributions of endowments in the public sector and of returns in the private sector.

Suggested Citation

  • Domenico Depalo & Raffaela Giordano & Evangelia Papapetrou, 2013. "Public-private wage differentials in euro area countries: evidence from quantile decomposition analysis," Temi di discussione (Economic working papers) 907, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_907_13
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    More about this item

    Keywords

    public employment; wage differentials; wage determination.;

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • 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
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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