Reducing Public-Private Sector Pay Differentials: The Single Spine Pay Policy as a Natural Experiment in Ghana

Akwasi Ampofo and Firmin Doko Tchatoka

No 2018-02, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: Empirical studies have documented the existence of the public-private pay differentials in both developed and developing countries. The implementation of policies aiming to reduce this gap has however been mitigated or inconclusive. This paper exploits the Single Spine Pay Policy (SSPP) in Ghana as a natural experiment to examine the effectiveness of wage policies in developing countries. The SSPP was implemented in 2010 by the Government of Ghana to address the public-private sector wage gap and improve productivity in the public sector. Using a quantile treatment effect approach based on a Difference-In-Difference (DID) estimation, we show that the SSPP has yet to reduce the wage gap between the public and private sectors across the entire distribution of earnings in Ghana. The improvement observed is only at the lower tail of the distribution of earnings. However, the SSPP has a larger effect on the earnings of female workers than that of males in the education and health services sector, suggesting that the policy was successful in reducing the gender-wage gap in that sector. Moreover, the SSPP has decreased the productivity of workers across the distribution of earnings, mainly due to a decrease in the effort of female public sector workers. Nevertheless, the SSPP has had some successes and could be improved by putting in place a good managerial quality in the government' agencies. In addition, it is important that the Government pays much attention to various macroeconomic factors that have challenged the success of the SSPP.

Keywords: Public sector; Efficiency wage theory; Quantile treatment effect model; DID estimation (search for similar items in EconPapers)
JEL-codes: C31 G15 J24 J31 J45 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-dev and nep-lma
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Journal Article: REDUCING PUBLIC‐PRIVATE SECTOR PAY DIFFERENTIALS: THE SINGLE SPINE PAY POLICY AS A NATURAL EXPERIMENT IN GHANA (2019)
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