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Wage differentials and state‐private sector employment choice in Yugoslavia

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  • Michael M. Lokshin
  • Branko Jovanovic

Abstract

In this study we use the newly available Yugoslavian Labor Force Survey data to investigate wage differentials and employment decisions in the state and private sectors in Yugoslavia. For the analysis we use three empirical models that rely on different statistical assumptions. We extend the standard switching regression model to allow non‐normality in the joint distribution of the error terms. After correcting for the sector selection bias and controlling for workers’ characteristics we find a private sector wage advantage. The wage premium is largest for workers with low education levels and declining for workers with higher educational levels. Given the regulatory and tax policies that pushed the private sector into the informal sphere of the economy during the period covered by our data, we argue that the state/private wage gap is likely to grow in the future. This will make it increasingly difficult for the state sector to attract and retain highly skilled employees.

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  • Michael M. Lokshin & Branko Jovanovic, 2003. "Wage differentials and state‐private sector employment choice in Yugoslavia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 463-491, September.
    • Handle: RePEc:bla:etrans:v:11:y:2003:i:3:p:463-491
    DOI: 10.1111/1468-0351.00153
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    9. Démurger, Sylvie & Li, Shi & Yang, Juan, 2012. "Earnings differentials between the public and private sectors in China: Exploring changes for urban local residents in the 2000s," China Economic Review, Elsevier, vol. 23(1), pages 138-153.
    10. Vladisavljević, Marko & Narazani, Edlira & Golubović, Vojin, 2017. "Public-private wage differences in the Western Balkan countries," MPRA Paper 80739, University Library of Munich, Germany.
    11. Gabriela Grotkowska & Leszek Wincenciak & Tomasz Gajderowicz, 2017. "Evolution of the Public-Sector Wage Premium in Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 5-31.
    12. Vladimir Gimpelson & Anna Lukiyanova & Anna Sharunina, 2015. "Estimating the Public-Private Wage Gap in Russia: What Does Quantile Regression Tell Us?," HSE Working papers WP BRP 104/EC/2015, National Research University Higher School of Economics.
    13. Monojit Chatterji & Terhi Maczulskij & Jaakko Pehkonen, 2008. "Public Sector Pay in Finland," Dundee Discussion Papers in Economics 213, Economic Studies, University of Dundee.
    14. Jelena Laušev, 2012. "Public Sector Pay Gap In Serbia During Large-Scale Privatisation,By Educational Qualification," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 57(192), pages 7-24, January –.
    15. Nikolic, Jelena & Rubil, Ivica & Tomić, Iva, 2017. "Pre-crisis reforms, austerity measures and the public-private wage gap in two emerging economies," Economic Systems, Elsevier, vol. 41(2), pages 248-265.
    16. Linz, Susan J. & Semykina, Anastasia, 2009. "Personality traits as performance enhancers? A comparative analysis of workers in Russia, Armenia and Kazakhstan," Journal of Economic Psychology, Elsevier, vol. 30(1), pages 71-91, February.
    17. Costas Christou, 2013. "The dynamics of wage determination in Romania," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(4), pages 713-729, October.
    18. Jelena Nikolic & Ivica Rubil & Iva Tomic, 2014. "Changes in Public and Private Sector Pay Structures in Two Emerging Market Economies during the Crisis," Working Papers 1403, The Institute of Economics, Zagreb.
    19. Kosovka Ognjenović, 2011. "Wage Differences between the Private and the Public Sector in Serbia: Some Evidence from Survey Data," wiiw Balkan Observatory Working Papers 91, The Vienna Institute for International Economic Studies, wiiw.
    20. Zhuravleva, T.L. (Журавлева, Т.), 2016. "Social Benefits, Job Security and Corruption: What 'Fine' State Employees [Социальные Льготы, Гарантии Занятости И Коррупция: Что «Штрафует» Бюджетников]," Working Papers 3051, Russian Presidential Academy of National Economy and Public Administration.
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