The Public/Private Wage Differential in the Land of Gross National Happiness

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 combi...

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Bibliographic Details
Main Author: Schmillen, Achim D.
Format: Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2017
Subjects:
Online Access:http://documents.worldbank.org/curated/en/557301482173775864/The-public-private-wage-differential-in-the-land-of-gross-national-happiness
http://hdl.handle.net/10986/25828
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Summary: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.