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The public/private wage differential in the land of gross national happiness

Achim Schmillen

No 7925, Policy Research Working Paper Series from The World Bank

Abstract: In Bhutan, the public sector is usually seen as the most desirable employer. This study asks if this can be attributed to public sector employees receiving higher wages than comparable private sector workers. To answer the question, the study combines an Oaxaca-type decomposition of wage differentials into characteristics and coefficients effects with a multinomial logit model for self-selection into labor force participation and the public or private sector. The study finds that the public/private wage differential is sizeable but can entirely be accounted for by observable characteristics. At the same time, there is strong evidence that preferences for public sector jobs are caused by pronounced intersectoral differences in overall compensation packages, in particular fringe benefits.

Keywords: Rural Labor Markets; Non Governmental Organizations; Public Sector Management and Reform; Labor Markets; Economics and Institutions (search for similar items in EconPapers)
Date: 2016-12-19
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