Template-Type: ReDIF-Paper 1.0
Author-Name: Ricardo Hausmann
Author-Email: ricardo_hausmann@harvard.edu
Author-Workplace-Name: Harvard's Growth Lab
Author-Person: pha552
Author-Name: Ljubica Nedelkoska
Author-Email: ljubica_nedelkoska@hks.harvard.edu
Author-Workplace-Name: Center for International Development at Harvard University
Author-Name: Sehar Noor
Title: You Get What You Pay For: Sources and Consequences of the Public Sector Premium in Albania and Sri Lanka
Abstract: We study the factors behind the public sector premium in Albania and Sri Lanka, the group heterogeneity in the premium, the sources of public sector wage compression, and the impact of this compression on the way individuals self-select between the public and the private sector. Similar to other countries, the public sectors in Albania and Sri Lanka pay higher wages than the private sector, for all but the most valued employees. While half of the premium of Sri Lanka and two-thirds of it in Albania are explained by differences in the occupation-education-experience mix between the sectors, and the level of private sector informality, the unexplained part of the premium is significant enough to affect the preferences of working in the public sector for different groups. We show that the compressed distributions of public sector wages and benefits create incentives for positive sorting into the public sector among most employees, and negative sorting among the most productive ones.
Creation-Date: 2020-02
Classification-JEL: J31, J32, J38, O57
Keywords: public sector premium, self-selection, Albania, Sri Lanka, wage compression
Number: 153
Handle: RePEc:glh:wpfacu:153
File-Url: https://growthlab.cid.harvard.edu/files/growthlab/files/2020-02-cid-wp-376-public-sector-premium.pdf
File-Format: application/pdf