Public-private wage differences in the Western Balkan countries

This paper investigates wage differences between the public and private sectors in the Western Balkan countries. As currently there are no micro data sets that are fully comparable across countries, we provide evidence based on the available macro-level data and results from recent micro-level research which typically focus on the individual countries. We find that in all Western Balkan countries the average wages in the public sector are higher than the wages in the private sector, but also that the high-skilled workers work more frequently in the public sector, therefore partially or fully "justifying" the wage differences. Around the begining of 2010s, wage differences were lower in Montenegro, Albania and Kosovo, where when adjusted for the differences in workers characteristics they become insignificant. The differences were more promenent in Serbia, Macedonia and Bosnia and Herzegovina, where the differences in characteristic cannot explain the gap fully, and where the public sector wage premium is positive and significant. However, public private wage differences are still very volatile and under the impact of countries' political decisions. The differences in the size of the premium is discussed in the context of previously estblished correlates: differences in the total public sector size and private sector job security, as well as different size of the public sector wage premium at the different parts of the wage distribution. As public private wage gaps have important micro and macro level implications, their trends and mechanisms should be closely monitored and investigated in future research.