Public-Private Wage Differentials and Interactions Across Countries and Time
IMF Working Papers, March 17, 2023
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Bibliographic details
- Authors: Chadi Abdallah, David Coady, La-Bhus Fah Jirasavetakul
- Published: March 17, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400236853.001
Dataset and scope
- Compiled a novel database on average public and private sector wages and public-private wage differentials.
- Analysis covers variation by gender, skill level, over time, and the dynamic relationship between public and private wage levels and implications for inflation.
Key empirical findings
- On average, public-sector workers earn around 10 percent more relative to comparable private sector workers.
- The public sector wage premium is higher for:
- women
- low-skilled workers
- developing countries
- The average public sector wage premium varies counter-cyclically:
- increases during economic downturns
- increases prior to elections
- Both private sector wages and inflation respond positively to changes in public wages.
- There is significant heterogeneity in the effects across countries, reflecting differences in labor market characteristics and prevailing macroeconomic conditions.
Analytical emphasis and themes
- Comparative analysis by gender and skill level to document differential premiums.
- Time-series analysis to identify cyclical and political-cycle patterns (economic downturns and pre-election periods).
- Examination of dynamic interactions between public wages, private wages, and inflation.
Implications for policymakers
- Public wage setting can have spillovers to private sector wages and to inflation.
- Heterogeneous country effects imply policy responses should account for:
- labor market characteristics
- prevailing macroeconomic conditions
- distributional impacts across gender and skill groups
Source: Public-Private Wage Differentials and Interactions Across Countries and Time, Chadi Abdallah, David Coady, La-Bhus Fah Jirasavetakul, March 17, 2023.
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- Working Paper