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Public-Private Wage Gap In Latin America (1999-2007): A Matching Approach

Author

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  • Alejandra Mizala
  • Pilar Romaguera
  • Sebastian Gallegos

Abstract

Using matching methods, we estimate the public-private wage gap in seven Latin American countries—Argentina, Bolivia, Brazil, Chile, Costa Rica, Paraguay and Uruguay—for the years 1999 and 2007. These methods do not require any estimation of earnings equations and hence no validity-out-of-the-support assumptions; furthermore, this approach allows us to estimate not only the average wage gap but also its distribution. Our main findings indicate that the average public sector worker earns more than his/her private counterpart. This differential has increased over the 1999-2007 period. Our results also show that there are important differences along the wage distribution. In particular, we find that the public sector wage premium declines as it moves up the conditional wage distribution, becoming a public sector wage penalty for the higher percentiles. Over the 1999-2007 period, the public-private wage gap changes from positive to negative at higher percentiles of the distribution, but still the most qualified public sector workers do face a wage penalty. Therefore, the profitability of public sector employment seems to be at its greatest at the lower end of the wage distribution. JEL Classification: J31, D31. Key words: Public-private Wage Gap, Matching, Public Sector, Latin America.

Suggested Citation

  • Alejandra Mizala & Pilar Romaguera & Sebastian Gallegos, 2010. "Public-Private Wage Gap In Latin America (1999-2007): A Matching Approach," Documentos de Trabajo 268, Centro de Economía Aplicada, Universidad de Chile.
  • Handle: RePEc:edj:ceauch:268
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    3. Pedro Gomes & Zoe Kuehn, 2017. "Human capital and the size distribution of firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 164-179, October.
    4. Juan F. Escobar & Juuso Toikka, 2013. "Efficiency in Games With Markovian Private Information," Econometrica, Econometric Society, vol. 81(5), pages 1887-1934, September.
    5. Sofia Bauducco & Alexandre Janiak, 2012. "Minimum wages strike back: the effects on capital and labor demands in a large-firm framework," Documentos de Trabajo 287, Centro de Economía Aplicada, Universidad de Chile.
    6. Antonio Romero-Medina & Matteo Triossi, 2013. "Games with capacity manipulation: incentives and Nash equilibria," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 41(3), pages 701-720, September.
    7. Pedro Gomes & Zoe Kuehn, 2017. "Human capital and the size distribution of firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 164-179, October.
    8. Romero-Medina, Antonio & Triossi, Matteo, 2013. "Acyclicity and singleton cores in matching markets," Economics Letters, Elsevier, vol. 118(1), pages 237-239.
    9. Romero-Medina, Antonio & Triossi, Matteo, 2014. "Non-revelation mechanisms in many-to-one markets," Games and Economic Behavior, Elsevier, vol. 87(C), pages 624-630.
    10. Evangelina Dardati & Julio Riutort, 2011. "Investment and Environmental Regulation: Evidence on the Role of Cash Flow," Documentos de Trabajo 283, Centro de Economía Aplicada, Universidad de Chile.
    11. F. Balmaceda & S.R. Balseiro & J.R. Correa & N.E. Stier-Moses, 2010. "Cost of Moral Hazard and Limited Liability in the Principal-Agent Problem," Documentos de Trabajo 275, Centro de Economía Aplicada, Universidad de Chile.
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    More about this item

    Keywords

    public-private wage gap; matching; public sector; latin america.;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution

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