Wage differentials between the publicand private sectors in Chile: Evidence from longitudinal data

Abstract

Despite its importance, the literature on wage differentials between public-and private- A large proportion of the labour force throughout the world is employed in the public sector. According to data from the Organization for Economic Cooperation and Development (oecd, 2011), the public sector provides 30% of all jobs in Norway and Denmark, 22% in France and 16% in the United States. Although public employment accounts for roughly 15% of total employment across Latin America, and 10% in Chile specifically (Mizala, Romaguera and Gallegos, 2011), there has been very little comparative analysis of employment and wages in the two sectors in the region. The present study contributes to the literature by analysing the wage gap and mobility between the public and private sectors among wage-earners in Chile, using panel data from the Social Protection Survey (eps) for the period [2002][2003][2004][2005][2006][2007][2008][2009]. Employment in the public and private sectors has specific features that may affect pay in each sector: (i) some productive activities are undertaken typically either by the public or by the private sector; (ii) publicsector hiring often obeys different rules than those of the private sector (political decisions for example); (iii) the public sector is regulated by specific legislation on employment conditions; and, in addition, compliance with general labour legislation is much stricter in the public sector than in the private sector in many countries. There is also evidence that public-sector workers are more risk-averse and display a greater preference for public services and non-profit institutions (Gregory and Borland, 1999).The literature on wage differences between publicand private-sector workers comes mainly from developed countries. In general, studies provide evidence of a premium for working in the public sector, which is higher among women but declines over the wage distribution, and can even become negative. 1 The evidence also shows that the public-sector wage distribution is less dispersed than its private sector counterpart, even when observable characteristics are controlled for (Bender and Elliott, 1999).An important methodological issue when analysing inter-sectoral wage differences is that workers have variable unobservable characteristics (innate abilities, motivation, risk aversion and others). These affect their wage and the decision to work in the private or public sector, thereby biasing the results. Using data from the United States, Krueger (1988) finds that, when using longitudinal data and correcting for selection bias, the unexplained wage gap between the sectors is substantially smaller than that obtained from ordinary least squares (ols) estimations with cross-section data. More recent studies, such as Lee (2004) for the United States, have obtained similar results.Among the most recent studies, Bargain and Melly (2008) use longitudinal data for France and estimate the average wage gap with a fixed-effects model and quantile regressions with fixed effects...

Job Satisfaction and Labor Fluctuation: A Case Study in the Logistics Sector in Serbia

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