Public and private sector wages in the Netherlands

Published in: European Economic Review 37 (1993). 97-114. (with Joop Hartog )

There is much debate in the Netherlands about underpayment of public sector workers relative to private sector workers. In this paper we analyze the wage structures in both sectors, using an endogenous switching regression model. Unlike previous Dutch studies, we find that the earnings prospects of public sector workers are better in the public sector than in the private sector. For private sector workers we find the exact opposite; their earnings prospects are better in the private sector. Moreover the allocation over sectors points to comparative advantages.

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