The lifetime earnings premium in the public sector: The view from Europe

Matt Dickson, Fabien Postel-Vinay, Hélène Turon*

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

9 Citations (Scopus)

Abstract

In a context of widespread concern about budget deficits, it is important to assess whether public sector pay is in line with the private sector. Our paper proposes an estimation of differences in lifetime values of employment between public and private sectors for five European countries. We use data from the European Community Household Panel over the period 1994-2001 for Germany, the Netherlands, France, Italy and Spain. We look at lifetime values instead of wage levels because, as we show in our results, differences in earnings mobility, earnings volatility and job loss risk across sectors occur in many instances and these will matter to forward-looking individuals. When aggregated into a measure of lifetime value of employment in either sector, these differences yield estimates of the lifetime premium in the public sector for these five countries. We also present differences in the institutional and labour market structures in these countries and find that countries for which we estimate a positive lifetime premium in the public sector, i.e. France and Spain, are also the countries where access to the public sector requires costly entry procedures. This paper is to the best of our knowledge the first to use this dynamic approach applied to Europe, which we are able to do with a common dataset, time-period and model.

Original languageEnglish
Pages (from-to)141-161
Number of pages21
JournalLabour Economics
Volume31
DOIs
Publication statusPublished - 1 Dec 2014

Keywords

  • Income dynamics
  • Institutions
  • Job mobility
  • Public-private inequality
  • Selection effects

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