The Lifetime Earnings Premium in the Public Sector: The View from Europe

Matt Dickson, Fabien Postel-Vinay and Hélène Turon

No 8159, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In a context of widespread concern about budget deficits, it is important to assess whether public sector pay is in line with the private sector. Our paper proposes an estimation of differences in lifetime values of employment between public and private sectors for five European countries. We use data from the European Community Household Panel over the period 1994-2001 for Germany, the Netherlands, France, Italy and Spain. We look at lifetime values instead of wage levels because, as we show in our results, differences in earnings mobility, earnings volatility and job loss risk across sectors occur in many instances and these will matter to forward-looking individuals. When aggregated into a measure of lifetime value of employment in either sector, these differences yield estimates of the lifetime premium in the public sector for these five countries. We also present differences in the institutional and labour market structures in these countries and find that countries for which we estimate a positive lifetime premium in the public sector, i.e. France and Spain, are also the countries where access to the public sector requires costly entry procedures. This paper is to the best of our knowledge the first to use this dynamic approach applied to Europe, which we are able to do with a common dataset, time-period and model.

Keywords: institutions; public-private inequality; job mobility; income dynamics; selection effects (search for similar items in EconPapers)
JEL-codes: J31 J45 J62 (search for similar items in EconPapers)
Pages: 94 pages
Date: 2014-04
New Economics Papers: this item is included in nep-eec, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Published - revised version published in: Labour Economics, 2014, 31, 141–161

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Related works:
Journal Article: The lifetime earnings premium in the public sector: The view from Europe (2014)
Working Paper: The Lifetime Earnings Premium in the Public Sector: The View from Europe (2014)
Working Paper: The Lifetime Earnings Premium in the Public Sector: The View from Europe (2014)
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