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This article examines the determination of wage differentials in the public and private sectors of Greece. Also, it considers the effects of income policies on the existing wage differentials for the period 1975‐85. The empirical analysis is based on the hypothesis that wages depend on labour productivity which is a function of certain measurable personal characteristics, such as education, experience and skill. The main findings are that the public sector pays higher wages than the private sector. The public sector also offers higher returns with respect to education and experience, while the private sector compensates more skilled workers. Finally, it is shown that there is a narrowing of existing wage differentials during the examined period especially on determinants expressing productivity‐related characteristics such as education, experience and skill.

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