Abstract
Analyses of the static private-public wage premium are available for most industrialized countries and the higher education level in the public sector has been shown to be important. We address three shortcomings in these studies – the return to work experience accumulated in the two sectors, the role of geography, and gender differences. Rich register data for Norway allow for observation of work experience by sector and region, and the dynamic gap resulting from different returns to sector experience can be calculated. When selection on observable and unobservable worker characteristics is controlled for, the estimates show that experience accumulated in the private sector has higher return than public sector experience. Geography matters, and both the static gap and the dynamic experience effect are higher in cities. For the low educated, the additional return to private experience is a city phenomenon only. Gender differences are important for high-educated workers. High-educated women have less additional return to private sector experience than high-educated men and receive the same gain from experience accumulated in cities and in the rest of the country. The dynamic experience effect adds to the static private wage premium, and for high-educated male workers it accounts for about 2/3 of the total wage gap including 10 years of experience.
Highlights
The static private-public wage gap varies across countries with different labor market and public sector institutions and policies
Our result for the selection-adjusted static private sector wage premium in Norway is similar to their result for The Netherlands, but while they find a lifetime premium of about zero, we find that return to experience is increasing the private premium considerably
The dynamic experience effect adds to the static private wage premium, and for high-educated male workers, it accounts for about 2/3 of the total wage gap
Summary
The static private-public wage gap varies across countries with different labor market and public sector institutions and policies. Based on rich register data for Norway with observation of sector- and region-specific experience of individual workers over time, we estimate the experience effects and how the static and dynamic private-public wage gaps vary between cities and the rest of the country for male and female workers.. A few studies of the static private-public wage gap include potential or actual work experience as a control variable, and Maczulskij and Pehkonen (2011) estimate the return to aggregate experience for workers in the two sectors. Gender differences at labor markets represent a large research area, and in our context, wage level and return to experience by sector may differ between male and female workers and whether they are located inside or outside cities. The dynamic experience effect adds to the static private wage premium, and for high-educated male workers, it accounts for about 2/3 of the total wage gap.
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