Seminar Topic:

With the increase in national debts, the salary cost and productivity of civil servants are under scrutiny. However, public wage setting policies should account for relevant comparisons with the private sector. We suggest novel evidence for France by conducting a comprehensive assessment of the public sector wage gaps throughout the distribution and over the long period. We exploit a very large panel of French salary workers drawn from administrative data for 1988-2013. We estimate the public sector premia/penalties on the unconditional wage distribution while originally accounting for fixed effects and a jackknife correction for potential incidental parameter bias. The public wage gap is broadly negative in France, with larger penalties at the top, which contributes to a compression of the wage distribution by the public sector. This equalizing effect is revealed when the incidental parameter bias in standard fixed effect quantile estimations is corrected for. Time changes since 1988 are consistently explained by a mix of political and business cycles. The unobserved skill gap between sectors tends to decline in early years due to less less-selective recruitment schemes. It totally disappears in the recent period, suggesting the detrimental effect of nominal wage freeze and the absence of performance-based remuneration among public sector executives.

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