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Wage differentials and state-private sector employment choice in the Federal Republic of Yugoslavia

  • Lokshin, Michael M.
  • Jovanovic, Branko

The authors use the newly available Yugoslavian Labor Force Survey data to investigate wage differentials and employment decisions in the state and private sectors in Yugoslavia. For the analysis the authors use three empirical models that rely on different statistical assumptions. They extend the standard switching regression model to allow non-normality in the joint distribution of the error terms. After correcting for the sector selection bias and controlling for workers'characteristics the authors find a private sector wage advantage. The wage premium is largest for workers with low education levels and declining for workers with higher educational levels. Given the regulatory and tax policies that pushed the private sector into the informal sphere of the economy during the period covered by our data, the authors argue that the state-private wage gap is likely to grow in the future. This will make it increasingly difficult for the state sector to attract and retain highly skilled employees.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2959.

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Date of creation: 31 Jan 2003
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Handle: RePEc:wbk:wbrwps:2959
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  1. Branko Jovanovic & Michael M. Lokshin, 2004. "Wage Differentials between the State and Private Sectors in Moscow," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 50(1), pages 107-123, 03.
  2. Falaris, Evangelos M., 2004. "Private and public sector wages in Bulgaria," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 56-72, March.
  3. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  4. Adamchik, Vera A. & Bedi, Arjun S., 2000. "Wage differentials between the public and the private sectors: evidence from an economy in transition," Labour Economics, Elsevier, vol. 7(2), pages 203-224, March.
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