Can a fifty percent increase in public sector wages improve the position of public sector employees in the long run? An assessment of the public-private income gap in Hungary
We provide a detailed descriptive analysis of the long-term effects of the 50 percent public sector wage increase initiated by the government in 2002 in order to improve the relative situation of public sector workers. The aim of this policy was to attract high quality workers to the public sector, and to counteract the problem of "brain drain," the loss of high-skilled workers to abroad. To study the effects on the public-private income gap - and on high-skilled workers in particular - we employ empirical methods that allow us to take differences in the entire wage distribution (quantile regressions), workforce and firm composition (decomposition), as well as various potential biases (corrections for underreported wages and workplace characteristics) into account. Our results indicate that there is a large income premium in favor of the private sector at the higher end of the income distribution, especially once we account for worker and firm characteristics, which suggests that the same person earns substantially less in the public sector. This is especially pronounced for high-skilled workers. The 50 percent increase initially improved the relative income of public sector workers, but in the longer run, income gaps returned to close to the pre-reform level and the distributional differences remained.
|Date of creation:||Aug 2011|
|Date of revision:|
|Contact details of provider:|| Postal: 1112 Budapest, Budaorsi ut 45.|
Phone: (+36-1) 309-2652
Fax: (36-1) 319-3136
Web page: http://econ.core.hu
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- James M. Poterba & Kim S. Rueben, 1994. "The Distribution of Public Sector Wage Premia: New Evidence Using Quantile Regression Methods," NBER Working Papers 4734, National Bureau of Economic Research, Inc.
- Koenker,Roger, 2005.
Cambridge University Press, number 9780521845731, December.
- Gábor Kertei & János Köll?, 2004.
"Fighting “Low Equilibria” by Doubling the Minimum Wage ? Hungary’s Experiment,"
William Davidson Institute Working Papers Series
2004-644, William Davidson Institute at the University of Michigan.
- Kertesi, Gabor & Köllő, János, 2003. "Fighting “Low Equilibria” by Doubling the Minimum Wage? Hungary’s Experiment," IZA Discussion Papers 970, Institute for the Study of Labor (IZA).
- Mirco Tonin, 2007.
"Minimum Wage and Tax Evasion: Theory and Evidence,"
William Davidson Institute Working Papers Series
wp865, William Davidson Institute at the University of Michigan.
- Mirco Tonin, 2007. "Minimum Wage and Tax Evasion: Theory and Evidence," IEHAS Discussion Papers 0701, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Tonin, Mirco, 2011. "Minimum Wage and Tax Evasion: Theory and Evidence," IZA Discussion Papers 5660, Institute for the Study of Labor (IZA).
- Mirco Tonin, 2009. "Minimumwage and tax evasion: theory and evidence," MNB Working Papers 2009/2, Magyar Nemzeti Bank (Central Bank of Hungary).
- Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
- Gabor Kertesi & Janos Kollo, 2001. "Economic transformation and the revaluation of human capital - Hungary, 1986-1999," Budapest Working Papers on the Labour Market 0104, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Santiago Budria, 2010.
"Schooling and the distribution of wages in the European private and public sectors,"
Taylor & Francis Journals, vol. 42(8), pages 1045-1054.
- Budria, Santiago, 2006. "Schooling and the distribution of wages in the european private and public sectors," MPRA Paper 90, University Library of Munich, Germany.
- Ben Jann, 2008.
"A Stata implementation of the Blinder-Oaxaca decomposition,"
ETH Zurich Sociology Working Papers
5, ETH Zurich, Chair of Sociology, revised 14 May 2008.
- Ben Jann, 2008. "OAXACA: Stata module to compute the Blinder-Oaxaca decomposition," Statistical Software Components S456936, Boston College Department of Economics, revised 25 Aug 2011.
- Michael Rosholm & Helena Skyt Nielsen, 2001. "The public-private sector wage gap in Zambia in the 1990s: A quantile regression approach," Empirical Economics, Springer, vol. 26(1), pages 169-182.
- Mueller, Richard E., 1998. "Public-private sector wage differentials in Canada: evidence from quantile regressions," Economics Letters, Elsevier, vol. 60(2), pages 229-235, August.
- Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, vol. 30(2), pages 505-520, 09.
- José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
- Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
When requesting a correction, please mention this item's handle: RePEc:has:bworkp:1106. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adrienn Foldi)
If references are entirely missing, you can add them using this form.