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Are Public Sector Workers Paid More Than Their Alternative Wage? Evidence from Longitudinal Data and Job Queues

  • Alan Krueger

This paper performs a longitudinal comparison of public and private sector pay. Although not decisive because of small sample sizes, the results tend to corroborate the conclusions of previous cross-sectional studies. Specifically, I find that on average wages of federal workers exceed those of private sector workers by 10% to 25%, while wages of state and local government workers are roughly equivalent to or slightly less than the wages of private sector workers. Furthermore, these conclusions hold for a sample of workers who joined the government after being involuntarily displaced from their private sector jobs. In addition, a comparative analysis of the length of job queues suggests that on average more workers apply for job openings in the federal government than in the private sector. Finally, both longitudinal and cross-sectional analyses support the conclusion that the union wage gap is substantially smaller in the public sector than in the private sector.

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File URL: http://arks.princeton.edu/ark:/88435/dsp01t148fh13b
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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 605.

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Date of creation: Sep 1987
Date of revision:
Handle: RePEc:pri:indrel:dsp01t148fh13b
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  1. Kathleen Classen Utgoff, 1983. "Compensation Levels and Quit Rates in the Public Sector," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 394-406.
  2. Steven F. Venti, 1985. "Wages in the Federal and Private Sectors," NBER Working Papers 1641, National Bureau of Economic Research, Inc.
  3. Mellow, Wesley S, 1981. "Unionism and Wages: A Longitudinal Analysis," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 43-52, February.
  4. Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
  5. Joseph F. Quinn, 1979. "Wage Differentials among Older Workers in the Public and Private Sectors," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 41-62.
  6. Richard B. Freeman, 1987. "How Do Public Sector Wages and Employment Respond to Economic Conditions?," NBER Chapters, in: Public Sector Payrolls, pages 183-216 National Bureau of Economic Research, Inc.
  7. Sharon P. Smith, 1976. "Pay differential between federal government and private sector workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 29(2), pages 179-197, January.
  8. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  9. Borjas, George J, 1980. "Wage Determination in the Federal Government: The Role of Constituents and Bureaucrats," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1110-47, December.
  10. Ronald G. Ehrenberg & Joshua L. Schwarz, 1983. "Public Sector Labor Markets," NBER Working Papers 1179, National Bureau of Economic Research, Inc.
  11. Richard A. Ippolito, 1987. "Why Federal Workers Don't Quit," Journal of Human Resources, University of Wisconsin Press, vol. 22(2), pages 281-299.
  12. Walter Fogel & David Lewin, 1974. "Wage determination in the public sector," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 27(3), pages 410-431, April.
  13. Joseph E. Stiglitz, 1984. "Theories of Wage Rigidity," NBER Working Papers 1442, National Bureau of Economic Research, Inc.
  14. Martin Asher & Joel Popkin, 1984. "The effect of gender and race differentials on public-private wage comparisons: A study of postal workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 38(1), pages 16-25, October.
  15. Brown, Charles, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 113-34, February.
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