The public-private sector wage gap in Latvia

Karlis Vilerts

Baltic Journal of Economics, 2018, vol. 18, issue 1, 25-50

Abstract: This study investigates the publicÐprivate sector wage gap in Latvia using microdata from the labour force survey. The severity of public sector wage cuts employed as a response to the economic crisis and subsequent recovery provides a test bed to analyse whether and how the public-private sector wage gap has adjusted after consolidation-driven wage cuts. Findings reveal that the observed wage gap is slightly in favour of the public sector; however, once differences in individual characteristics and selection effects are considered, results point to a private sector wage premium. Findings also suggest that the private sector wage premium has increased since the pre-crisis period. A significant private sector wage premium raises doubts on whether a system that is reliant on discretionary fiscal measures is efficient enough in eliminating unwarranted differences in wage. In particular, whether a re-adjustment process of public sector wages works after consolidation-driven wage cuts.

Keywords: Double sample selection; Oaxaca-Ransom decomposition; public sector wages; publicÐprivate sector wage gap (search for similar items in EconPapers)
JEL-codes: J31 J33 J88 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:18:y:2018:i:1:p:25-50

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