Public and Private Sector Wages of Male Workers in Germany
In this paper, we analyze several statistical assumptions used in empirical models on public -private sector wage structures. Based on data for Germany, which contain a large range of background variables usually not available in other studies, we investigate the sensitivity of the results to various specification and identification assumptions. The standard switching regression model is extended to allow for endogeneity of education level, experience, and hours worked. These estensions lead to considerably different parameter estimates. We compute and compare conditional and unconditional wage differentials between the public and the private sector for the various specifications. These differentials are sensitive to exclusion restictions on regressors, but robust across specifications which do and do not allow for endogeneity of education, experience, and hours worked.
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