Higher Wages, Lower Pay : Public vs. Private Sector Compensation in Peru
Do public sector employees earn less than their counterparts in the private sector? This paper addresses this question in the case of Peru, a country where civil service reform is being debated yet the only available empirical studies on wage diffe...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111026082814 http://hdl.handle.net/10986/3624 |
| Summary: | Do public sector employees earn less
than their counterparts in the private sector? This paper
addresses this question in the case of Peru, a country where
civil service reform is being debated yet the only available
empirical studies on wage differentials date back to the
late 1980s. Using data from the 2009 national household
survey, the authors perform a multiple step analysis. First,
they estimate a single equation with a public sector dummy,
which is found to be statistically significant and positive
when only monetary wages are taken into account. However,
when in-kind payments and bonuses are included to measure
compensation, the analysis finds a private sector premium.
Second, they estimate for public and formal private
employees two distinct wage functions, including the inverse
Mills ratio. This takes into account the selection bias
resulting from workers self-selecting into the public or
private sector. Third, these results are used to decompose
wage differentials using the standard Oaxaca-Blinder
approach. The results show that the compensation
differentials are not significant except for the sub-sample
of employees that achieved a postgraduate degree. |
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