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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.

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  • 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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    2. Piazzalunga, Daniela & Di Tommaso, Maria Laura, 2015. "The increase of gender wage gap in Italy during the 2008-2012 economic crisis," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201532, University of Turin.
    3. Ayça Akarçay Gürbüz & Sezgin Polat, 2016. "Public--private wage differentials in Turkey: public policy or market dynamics?," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 326-356, May.
    4. Christl, Michael & Köppl-Turyna, Monika, 2017. "Gender wage gap and the role of skills: evidence from PIAAC dataset," Working Papers 05, Agenda Austria.
    5. Rubil, Ivica, 2013. "The Great Recession and the Public-Private Wage Gap: Distributional Decomposition Evidence from Croatia 2008-2011," MPRA Paper 46798, University Library of Munich, Germany.
    6. Raúl Ramos & Esteban Sanromá & Hipólito Simón, 2014. "Public-Private Sector Wage Differentials by Type of Contract: Evidence from Spain," Hacienda Pública Española, IEF, vol. 208(1), pages 107-141, March.
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    8. Daniela Piazzalunga & Maria Laura Di Tommaso, 2015. "The increase of the gender wage gap in Italy during the 2008-2012 economic crisis," Working Papers 381, ECINEQ, Society for the Study of Economic Inequality.
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    10. Nicholas Barton & Tessa Bold & Justin Sandefur, 2017. "Measuring Rents from Public Employment: Regression Discontinuity Evidence from Kenya - Working Paper 457," Working Papers 457, Center for Global Development.
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    13. Domenico Depalo & Raffaela Giordano & Evangelia Papapetrou, 2015. "Public–private wage differentials in euro-area countries: evidence from quantile decomposition analysis," Empirical Economics, Springer, vol. 49(3), pages 985-1015, November.
    14. Maria M. Campos & Domenico Depalo & Evangelia Papapetrou & Javier J. Pérez & Roberto Ramos, 2017. "Understanding the public sector pay gap," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 6(1), pages 1-29, December.
    15. Jelena Nikolic & Ivica Rubil & Iva Tomic, 2014. "Changes in Public and Private Sector Pay Structures in Two Emerging Market Economies during the Crisis," Working Papers 1403, The Institute of Economics, Zagreb.
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    18. Mehtabul Azam & Nishith Prakash, 2015. "A Distributional Analysis of Public–Private Wage Differential in India," LABOUR, CEIS, vol. 29(4), pages 394-414, December.
    19. Lucia Rizzica, 2016. "Why go public? A study of the individual determinants of public sector employment choice," Questioni di Economia e Finanza (Occasional Papers) 343, Bank of Italy, Economic Research and International Relations Area.
    20. Marta Auricchio & Emanuele Ciani & Alberto Dalmazzo & Guido de Blasio, 2017. "The consequences of public employment: evidence from Italian municipalities," Temi di discussione (Economic working papers) 1125, Bank of Italy, Economic Research and International Relations Area.

    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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