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The public/private wage differential in the land of gross national happiness

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  • Schmillen,Achim Daniel

Abstract

In Bhutan, the public sector is usually seen as the most desirable employer. This study asks if this can be attributed to public sector employees receiving higher wages than comparable private sector workers. To answer the question, the study combines an Oaxaca-type decomposition of wage differentials into characteristics and coefficients effects with a multinomial logit model for self-selection into labor force participation and the public or private sector. The study finds that the public/private wage differential is sizeable but can entirely be accounted for by observable characteristics. At the same time, there is strong evidence that preferences for public sector jobs are caused by pronounced intersectoral differences in overall compensation packages, in particular fringe benefits.

Suggested Citation

  • Schmillen,Achim Daniel, 2016. "The public/private wage differential in the land of gross national happiness," Policy Research Working Paper Series 7925, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7925
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    Cited by:

    1. Gang, Ira N. & Schmillen, Achim, 2017. "Sometimes, winners lose: Economic disparity and indigenization in Kazakhstan," Journal of Comparative Economics, Elsevier, vol. 45(3), pages 605-621.
    2. World Bank Group & Royal Government of Bhutan Ministry of Labor and Human Resources, 2016. "Bhutan’s Labor Market," World Bank Publications - Reports 25703, The World Bank Group.
    3. Lukyanova, Anna, 2021. "What keeps public sector workers in low-paid jobs? The role of self-selection and non-cognitive skills in explaining the public-private wage gap," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 62, pages 32-53.

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