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Wage differentials and state‐private sector employment choice in Yugoslavia*

Wage differentials and state‐private sector employment choice in Yugoslavia* In this study we use the newly available Yugoslavian Labor Force Survey data to investigate wage differentials and employment decisions in the state and private sectors in Yugoslavia. For the analysis we use three empirical models that rely on different statistical assumptions. We extend the standard switching regression model to allow non‐normality in the joint distribution of the error terms. After correcting for the sector selection bias and controlling for workers’ characteristics we find a private sector wage advantage. The wage premium is largest for workers with low education levels and declining for workers with higher educational levels. Given the regulatory and tax policies that pushed the private sector into the informal sphere of the economy during the period covered by our data, we argue that the state/private wage gap is likely to grow in the future. This will make it increasingly difficult for the state sector to attract and retain highly skilled employees. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics of Transition and Institutional Change Wiley

Wage differentials and state‐private sector employment choice in Yugoslavia*

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References (44)

Publisher
Wiley
Copyright
Copyright © 2003 Wiley Subscription Services, Inc., A Wiley Company
ISSN
2577-6975
eISSN
2577-6983
DOI
10.1111/1468-0351.00153
Publisher site
See Article on Publisher Site

Abstract

In this study we use the newly available Yugoslavian Labor Force Survey data to investigate wage differentials and employment decisions in the state and private sectors in Yugoslavia. For the analysis we use three empirical models that rely on different statistical assumptions. We extend the standard switching regression model to allow non‐normality in the joint distribution of the error terms. After correcting for the sector selection bias and controlling for workers’ characteristics we find a private sector wage advantage. The wage premium is largest for workers with low education levels and declining for workers with higher educational levels. Given the regulatory and tax policies that pushed the private sector into the informal sphere of the economy during the period covered by our data, we argue that the state/private wage gap is likely to grow in the future. This will make it increasingly difficult for the state sector to attract and retain highly skilled employees.

Journal

Economics of Transition and Institutional Change – Wiley

Published: Sep 1, 2003

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