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The Lifetime Earnings Premium in the Public Sector: The View from Europe

Author Info

Listed author(s):
  • Dickson, Matt

    ()

    (University of Bath)

  • Postel-Vinay, Fabien

    ()

    (University College London)

  • Turon, Hélène

    ()

    (University of Bristol)

Abstract

In a context of widespread concern about budget deficits, it is important to assess whether public sector pay is in line with the private sector. Our paper proposes an estimation of differences in lifetime values of employment between public and private sectors for five European countries. We use data from the European Community Household Panel over the period 1994-2001 for Germany, the Netherlands, France, Italy and Spain. We look at lifetime values instead of wage levels because, as we show in our results, differences in earnings mobility, earnings volatility and job loss risk across sectors occur in many instances and these will matter to forward-looking individuals. When aggregated into a measure of lifetime value of employment in either sector, these differences yield estimates of the lifetime premium in the public sector for these five countries. We also present differences in the institutional and labour market structures in these countries and find that countries for which we estimate a positive lifetime premium in the public sector, i.e. France and Spain, are also the countries where access to the public sector requires costly entry procedures. This paper is to the best of our knowledge the first to use this dynamic approach applied to Europe, which we are able to do with a common dataset, time-period and model.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 8159.

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Length: 94 pages
Date of creation: Apr 2014
Handle: RePEc:iza:izadps:dp8159
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Keywords: institutions; public-private inequality; job mobility; income dynamics; selection effects;

Other versions of this item:

Find related papers by JEL classification:
  • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
  • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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Cited by:

  1. repec:spr:izalpo:v:6:y:2017:i:1:d:10.1186_s40173-017-0086-0 is not listed on IDEAS
  2. Dickson, Matt & Postel-Vinay, Fabien & Turon, Hélène, 2014. "The lifetime earnings premium in the public sector: The view from Europe," Labour Economics, Elsevier, vol. 31(C), pages 141-161.
  3. Raffaela Giordano & Manuel Coutinho Pereira & Domenico Depalo & Bruno Eugène & Evangelia Papapetrou & Javier J. Pérez & Lukas Reiss & Mojca Roter, 2014. "The Public Sector Pay Gap in a Selection of Euro Area Countries in the Pre-crisis Period," Hacienda Pública Española, IEF, vol. 214(3), pages 11-34, September.
  4. Mussida Chiara & Sciulli Dario, 2015. "Flexibility Policies and Re-employment Probabilities in Italy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(2), pages 621-651, April.
  5. Fabien Postel-Vinay, 2015. "Does it pay to be a public-sector employee?," IZA World of Labor, Institute for the Study of Labor (IZA), pages 156-156, June.
  6. Barton, Nicholas & Bold, Tessa & Sandefur, Justin, 2017. "Measuring Rents from Public Employment: Regression discontinuity evidence from Kenya," CEPR Discussion Papers 12105, C.E.P.R. Discussion Papers.
  7. 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.
  8. Chiara Mussida & Dario Sciulli, 2016. "The trend over time of labour market opportunities for young people in Italy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(2), pages 291-321, August.
  9. 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.

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