Public–private wage differential in a post‐transition economy

Abstract

In this study, we estimate the public sector wage premium in a post‐transition economy, a quarter of a century since the collapse of the old regime. Our methodology uses a copula method to estimate the switching regression model, which allows for the relaxation of the restrictive assumption of joint normality. We control for employment selection into both sectors using an instrument based on information regarding learned professions. We use data from the Polish Survey of Earnings by Occupations (2012). Contrary to earlier results for Poland, we found positive selection into employment in both sectors, with positive average treatment effect on the treated and negative average treatment effect on the untreated. The results suggest that both private and public sector employees select themselves into the sector in which they earn more than they would in a counterfactual scenario.

The evolution of job tenure in transition economies

“…Among papers that analyse recent changes in the labour market conditions in post-communist countries, Privalko (2020) finds a negative correlation between tenure and job mobility among Russian workers. Grotkowska et al (2018) report that the more job experience a worker had in Poland, the smaller the public sector wage premium was for each additional year of tenure. Kupets (2015) shows that workers with a long tenure may be trapped in jobs with low educational requirements because of the high tenure premium in post-communist countries of Armenia, Georgia, Macedonia, and Ukraine.…”

“…Grotkowska et al. (2018) report that the more job experience a worker had in Poland, the smaller the public sector wage premium was for each additional year of tenure. Kupets (2015) shows that workers with a long tenure may be trapped in jobs with low educational requirements because of the high tenure premium in post‐communist countries of Armenia, Georgia, Macedonia, and Ukraine.…”

Job Tenure and Structural Change in the Transition Economies of Europe

“…Among papers that analyze recent changes in the labor market conditions in post-communist countries, Privalko (2020) evaluates the effects of age, gender, and tenure on the labor market trajectories of Russian workers, finding a negative correlation between tenure and job mobility. Grotkowska, Wincenciak, and Gajderowicz (2018) estimate the long-term public sector wage premium in Poland, using job tenure as a measure of human capital. They document a positive selection into both public and private employment, even though employees earned more in the public sector, which might be an indication of efficient job markets.…”

Foreign Direct Investments and Labour Force Indicators in Transition Economies: Linear Mixed-Effects Models Impact Analysis

“…In Poland, for example, there is a greater probability for female employment, especially in the public sector, which already shows over-employment as a consequence of former regimes institutional rules. This phenomenon affects higher brain drain and destruction of human capital quality (Grotkowska et al 2018). According to these authors, the public sector preferences may cause poor career perspectives, emigration, and difficulties in retaining skilled labour force.…”

“…Three decades ago, after the fall of socialist and communist regimes, the transition in the Central Eastern European countries began (Myck -Oczkowska 2018). The transition in these countries comprehends economic transition through privatization (Filipovic -Miljkovic 2014;Vuksic 2016), gross domestic product (GDP) and employment formation and other macroeconomic indicators, which depend mostly of public sector and institutions (Grotkowska et al 2018;Delibasic 2019;Filipovic -Miljkovic 2010). Brada et al (2006) stress that conflicts and political instability reduces FDI inflow in transition countries, while the delayed transition along with conflicts have reduced FDI inflows in the Balkans.…”