Earnings dynamics and uncertainty in Italy: how do they differ between the private and public sectors?

Abstract

This paper uses Italian panel data from the private and public sectors and analyses earnings dynamics and uncertainty by applying the minimum distance estimator. Results show that earnings careers markedly differ between public and private sectors. In particular, for private sector workers, the life cycle of earnings matters in the formation of earnings differentials, i.e., the data reveal the presence of heterogeneity of earnings growth rates. On the other hand, public sector data indicate that earnings growth is homogeneous over the life cycle and, as a consequence, initial earnings differences tend to persist over the career. Earnings uncertainty is found to be negligible in the public sector, suggesting that it provides more stable earnings careers.