Wage differentials between the public and the private sectors: Evidence from an economy in transition

This paper uses data from Poland to examine whether there are any wage differentials between workers in the public and the private sectors. After standardising for worker characteristics and sector selection effects, we find a private sector wage advantage. The wage premium is particularly pronounced for University-educated workers. Our results suggest that these wage differentials will make it difficult for the public sector to attract and retain skilled employees. In addition, lower public sector wages may encourage moonlighting and compromise the efficiency of the public sector.