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Public Sector Pay Gaps and Skill Levels: a Cross-Country Comparison

  • Paolo Ghinetti
  • Claudio Lucifora

    ()

    (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)

In this study, we investigate public-private pay determination using French, British and Italian micro data from the 2001 ECHP. We document that the distribution of wages is very different between public and private workers. As a result, the public pay premium varies as one moves up or down in the wage distribution. In France, Great Britain and Italy the public sector wage premium is higher for low skilled public sector workers, whilst the opposite happens for high skilled workers. These effects are more pronounced in the service sector. Additional results suggest that if a worker with certain characteristics was exogenously moved from the public to the private sector, he suffered a welfare (wage) loss, which is higher for the low skilled, who are the most protected in the public sector. In the light of the privatisation process of formerly public service, this process may in general impose some cost to involved public employees. Moreover, such costs are decreasing with the level of wages. Finally, the magnitude of these costs depend on the country considered, and, hence on the associated institutional setting.

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Paper provided by SEMEQ Department - Faculty of Economics - University of Eastern Piedmont in its series Working Papers with number 118.

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Length: 27 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:upo:upopwp:118
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  1. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  2. Dell'Aringa, Carlo & Lucifora, Claudio & Origo, Federica, 2005. "Public Sector Pay and Regional Competitiveness: A First Look at Regional Public-Private Wage Differentials in Italy," IZA Discussion Papers 1828, Institute for the Study of Labor (IZA).
  3. Blaise Melly, 2005. "Public-private sector wage differentials in Germany: Evidence from quantile regression," Empirical Economics, Springer, vol. 30(2), pages 505-520, 09.
  4. Claudio Lucifora & Dominique Meurs, 2004. "The Public Sector Pay Gap in France, Great Britain and Italy," CHILD Working Papers wp04_04, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  5. Stephen Nickell & Glenda Quintini, 2001. "Nominal Wage Rigidity and the Rate of Inflation," CEP Discussion Papers dp0489, Centre for Economic Performance, LSE.
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  7. 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.
  8. Yann Algan & Pierre Cahuc & André Zylberberg, 2002. "Public employment and labor market performances," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00256207, HAL.
  9. Elliott, R. F. & Bender, K. A., . "Relative Earnings in the UK Public sector: The Impact of Pay Reform on Pay Structure," Working Papers 98-04, Department of Economics, University of Aberdeen.
  10. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
  11. Richard Disney & Amanda Gosling, 1998. "Does it pay to work in the public sector?," Fiscal Studies, Institute for Fiscal Studies, vol. 19(4), pages 347-374, November.
  12. 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.
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