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Changes in Public and Private Sector Pay Structures in Two Emerging Market Economies during the Crisis

Author

Listed:
  • Jelena Nikolic

    (LSEE Research on South Eastern Europe, European Institute, LSE)

  • Ivica Rubil

    (The Institute of Economics, Zagreb)

  • Iva Tomic

    (The Institute of Economics, Zagreb)

Abstract

This paper estimates public-private sector wage differentials in two emerging market economies - Croatia and Serbia - between 2008 and 2011 in order to understand changes in the gap resulting from austerity measures undertaken by each sector. The paper focuses on counterfactual decompositions of the wage gap at the mean and at selected quantiles along the wage distribution, performed using an extension to the Oaxaca-Blinder method based on Recentered Influence Function (RIF) regressions and reweighting. The main results indicate that there was a wage premium in the public sector for both countries and in both years. Although the total wage gap decreased in Serbia during the crisis, the wage structure effect, or the returns to workers’ characteristics, increased in both countries. The paper shows that the private sector in both countries adjusted wages relative to the public sector more at the bottom than at the top of the wage distribution, which led to an increase in the relative public sector wage compression, especially in Croatia. While in Croatia the wage gaps stemming from differences between the public and private sector in the returns to characteristics for similar workers were within the range usually estimated for EU countries, these gaps were considerably higher in the case of Serbia.

Suggested Citation

  • 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.
    • Handle: RePEc:iez:wpaper:1403
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    References listed on IDEAS

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    Cited by:

    1. Oliver Falck & Siegfried Schönherr, 2016. "An Economic Reform Agenda for Croatia: a comprehensive economic reform package prepared for the Croatian Statehood Foundation," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 70, September.
    2. Marina Riem, 2016. "Fiscal Consolidation," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 17(1), pages 43-47, April.
    3. Rebekka Christopoulou & Vassilis Monastiriotis, 2016. "Public-private wage duality during the Greek crisis," Oxford Economic Papers, Oxford University Press, vol. 68(1), pages 174-196.
    4. Ajtene Avdullahi & Qazim Tmava, 2018. "Public-Private Wage Gap: The Effort Of The Private Sector To Attract, Motivate And Retain Qualified Staff In Kosovo," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 6(3), pages 59-71.
    5. Marina Riem, 2016. "Fiscal Consolidation," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 17(01), pages 43-47, April.

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    More about this item

    Keywords

    public-private wage gap; recession; unconditional quantile regression; recentered influence function; decomposition; Croatia; Serbia;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P3 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions

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