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Public-Private Sector Wage Differentials in Scotland: An Endogenous Switching Model

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  • Heitmueller, Axel

    (Imperial College London)

Abstract

The public-private sector wage gap in Scotland in 2000 is analysed using the extension sample of the British Household Panel Survey (BHPS). Employing an endogenous switching model, and testing for double sample selection from the participation decision and sector choice, the unadjusted wage gap is shown to be 10 per cent for males and 24 per cent for females. For males this is mainly due to differences in productive characteristics and selectivity. For females the picture is more ambiguous. Findings also suggest that there exists a substantial wage premium for male private sector employees. While there is no evidence of a sample selection bias for females, the sector choice of males is systematically correlated with unobservables. Furthermore, the structural switching regression indicates that expected wage differentials between sectors are an important driving force for sectoral assignment.

Suggested Citation

  • Heitmueller, Axel, 2004. "Public-Private Sector Wage Differentials in Scotland: An Endogenous Switching Model," IZA Discussion Papers 992, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp992
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    1. Anna Iara, 2006. "Skill diffusion by temporary migration? Returns to Western European working experience in the EU-accession countries," CERS-IE WORKING PAPERS 0607, Institute of Economics, Centre for Economic and Regional Studies, revised 30 Aug 2006.
    2. Nguyen Danh, Hoang Long, 2002. "public-private sector wage differentials for males and females in vietnam," MPRA Paper 6583, University Library of Munich, Germany.
    3. Santiago Budria, 2010. "Schooling and the distribution of wages in the European private and public sectors," Applied Economics, Taylor & Francis Journals, vol. 42(8), pages 1045-1054.
    4. Clémence Berson, 2016. "Private Versus Public Sector Wage Gap: Does Origin Matter?," Metroeconomica, Wiley Blackwell, vol. 67(4), pages 717-741, November.
    5. Chris Sakellariou, 2012. "Central Government versus private sector wages and cognitive skills: evidence using endogenous switching regression," Applied Economics, Taylor & Francis Journals, vol. 44(25), pages 3275-3286, September.
    6. Sarah Brown & Jennifer Roberts & Karl Taylor, 2010. "Reservation wages, labour market participation and health," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 173(3), pages 501-529, July.
    7. Bairagya Indrajit, 2020. "Returns to education in self-employment in India: A comparison across different selection models," WIDER Working Paper Series wp2020-5, World Institute for Development Economic Research (UNU-WIDER).
    8. Chatterji, Monojit & Maczulskij, Terhi & Pehkonen, Jaakko, 2008. "Public Sector Pay in Finland," SIRE Discussion Papers 2008-31, Scottish Institute for Research in Economics (SIRE).
    9. Indrajit Bairagya, 2020. "Returns to education in self-employment in India: A comparison across different selection models," WIDER Working Paper Series wp-2020-5, World Institute for Development Economic Research (UNU-WIDER).
    10. Elliott, Robert F. & Ma, Ada H.Y. & Scott, Anthony & Bell, David & Roberts, Elizabeth, 2007. "Geographically differentiated pay in the labour market for nurses," Journal of Health Economics, Elsevier, vol. 26(1), pages 190-212, January.
    11. Colella, Fabrizio, 2014. "Women's Part-Time - Full-Time Wage Differentials in Europe: an Endogenous Switching Model," MPRA Paper 55287, University Library of Munich, Germany.
    12. Anna Iara, 2008. "Skill Diffusion by Temporary Migration? Returns to Western European Work Experience in Central and East European Countries," wiiw Working Papers 46, The Vienna Institute for International Economic Studies, wiiw.
    13. Anna Iara, 2006. "Skill Diffusion by Temporary Migration? Returns to Western European Working Experience in the EU Accession Countries," wiiw Balkan Observatory Working Papers 69, The Vienna Institute for International Economic Studies, wiiw.
    14. Bold, Tessa & Barton, Nicholas & Sandefur, Justin, 2017. "Measuring Rents from Public Employment: Regression discontinuity evidence from Kenya," CEPR Discussion Papers 12105, C.E.P.R. Discussion Papers.
    15. 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.
    16. Kristjan-Olari Leping, 2005. "Public-Private Sector Wage Differential In Estonia: Evidence From Quantile Regression," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 39, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    17. Merja Kauhanen & Mari Kangasniemi, 2014. "Returns to return migration: wage premium of Estonian return migrants from Finland," Working Papers 290, Työn ja talouden tutkimus LABORE, The Labour Institute for Economic Research LABORE.

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    More about this item

    Keywords

    decomposition; wage differentials; double sample selection; endogenous switching;
    All these keywords.

    JEL classification:

    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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