Public - Private Sector Wage Differentials in Switzerland

This paper measures the differences in earnings distributions between public sector and private sector employees, based on data from the wage structure survey of 1996. We .first use quantile regressions to account for possible different wage premiums at various point of the distributions along the lines of POTERBA and RUEBEN (1994). As expected, we find that public sector employees at the low tail of the distribution earn a premium of up to 30 % for women and 10 % for men. On the contrary, the premium even becomes negative for men at the upper tail of the distribution. Following the methodology of JUHN, MURPHY, and PIERCE (1993), we next breakdown these inequalities into observable characteristics, price differences as well as unobservables. It is shown that unobservables tend to magnify the effect of prices along the distribution. Finally, we also estimate a switching regression model to account for possible selection bias. Our results indicate that public sector workers would perform better than average workers in both sectors.