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The Central Government‐Private Sector Wage Differential
Author(s) -
Bender Keith A.
Publication year - 1998
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/1467-6419.00052
Subject(s) - public sector , private sector , wage , differential (mechanical device) , labour economics , government (linguistics) , economics , economic sector , primary sector of the economy , estimation , economic growth , economy , linguistics , philosophy , management , aerospace engineering , engineering
Since Ehrenberg and Schwarz (1986) there has been a plethora of articles investigating the relationship between public and private sector wages. This article examines part of this post 1986 literature by reviewing articles that examine central government‐private sector wage differentials. In sum, most articles find that there is a premium paid to central government workers, although the premium has declined in recent years. In developing countries, however, the differential is usually negative. Women and minorities tend to do better in the public sector relative to their private sector counterparts. The evidence on union premiums between sectors is mixed, although the premium tends to be higher in the private sector. However public sector union workers do not do much better than private sector union members. The magnitude of all of the wage differentials discussed are sensitive to the estimation technique and data source used. The most common explanation for the public sector wage premium is economic rent accruing to government workers, although the public sector wage determination literature suggests that the differential is due to returns to political and ‘vote producing’ activities not relevant in the private sector.