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Spatial Variation of Public-Private Wage Differentials

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The aim of this paper is to estimate the adjusted sectoral wage gap in Poland and to examine its spatial differences in terms of the size of settlement units. In particular, a hypothesis that there is a negative relation between the public-sector wage premium and the size of a settlement unit is tested. We use a set of individual data from the representative survey Human Capital Balance (BKL) carried out in Poland for the period from 2010 to 2014. We apply the control function approach (both with homogeneous and heterogeneous impacts) to address the problem of selection mechanism. We show that, after controlling for structural differences in employment, generally there is a moderate positive premium related to public employment. However, this premium differs between types of settlement units, with public employment being most attractive in medium-sized cities. This may pose a challenge for the public sector regarding attracting highly qualified employees in the biggest cities. As a consequence, the efficiency of public-sector services provision (education, healthcare, administration) may be seriously threatened.
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There are a number of reasons, related to both the supply and demand side of the labour market, for which the public sector employment wage premium may vary spatially. This variation may affect the efficiency of public services provision, private investment and the equilibrium of regional labour markets. The aim of this study is to assess the scale of regional variation in Polish public-private wage differentials. In this paper, we use the individual dataset from the 2012 Structure of Earnings by Occupation (SEO) survey carried out by the CSO and the propensity score matching method, supplemented by quintile regression, to analyse regional differences in public- private wage differentials. The results reveal that in Poland, the public sector premium is highest in the least economically developed regions. Moreover, it significantly varies between regions across the wage distribution. The volatility of the premium may be to some extent explained by the structure of regional economies and by the development of the private sector in particular.
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