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Public‐private wage gaps and skill levels: evidence from French, British and Italian micro data

Author

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  • Paolo Ghinetti
  • Claudio Lucifora
Abstract
Purpose - The authors aim to investigate public‐private pay determination using French, British and Italian micro data from the 2001 ECHP (European Community Household Panel) and estimate public/private wage differentials by country. By focussing on different countries, they exploit institutional differences to gain insights on the process of pay formation. Design/methodology/approach - The authors use regression techniques to compute the pay premium both at the average and at different education/skill levels. They then decompose the observed differences into a part due to characteristics and another part due to different returns between sectors, also at different quantiles of the wage distributions within skills. Findings - Even after controlling for observable characteristics, the authors find an overall positive wage differential for public sector workers in each of the three countries. As expected, the differential varies by skill. In general, the present findings do not fully support the view that the public (private) sector pays more (less) among the low skilled than the private (public) sector, and that the opposite is true for the highly skilled. The authors also document that the public pay premium varies as one moves up or down in the skill distribution. Practical implications - On the one hand, the authors’ results confirm that the public sector acts in general as a “fair employer”, compressing pay dispersion with respect to the private sector. On the other hand, the interactions of public and private labour market institutional arrangements play a crucial role in shaping the structure of relative wages across sectors. For example, when the monopsony power in wage bargaining is relevant in both sectors as, for example, in Britain, the private sector pays in absolute value proportionally less, and also the public wage premium is smaller. Originality/value - This is the first attempt to use comparable data for three countries to analyse public/private wage differences by skill levels and to link the evidence with differences in public/private wage setting regimes.

Suggested Citation

  • Paolo Ghinetti & Claudio Lucifora, 2013. "Public‐private wage gaps and skill levels: evidence from French, British and Italian micro data," International Journal of Manpower, Emerald Group Publishing Limited, vol. 34(5), pages 429-446, August.
    • Handle: RePEc:eme:ijmpps:v:34:y:2013:i:5:p:429-446
    DOI: 10.1108/IJM-05-2013-0117
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    Citations

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    Cited by:

    1. Demirgüç-Kunt, Asli & Lokshin, Michael & Kolchin, Vladimir, 2023. "Effects of public sector wages on corruption: Wage inequality matters," Journal of Comparative Economics, Elsevier, vol. 51(3), pages 941-959.
    2. Ayça Akarçay Gürbüz & Sezgin Polat, 2016. "Public--private wage differentials in Turkey: public policy or market dynamics?," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 326-356, May.
    3. Brigitte Granville & Jaume Martorell Cruz, 2016. "Squared Segmentation: How the Insider/Outsider divide across Public/Private Employment shapes attitudes towards markets," Working Papers 78, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    4. Paolo Ghinetti, 2014. "A New Look at the Public Wage Premium in Italy: The Role of Schooling Endogeneity," LABOUR, CEIS, vol. 28(1), pages 87-111, March.

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