Public–private wage differential in a post‐transition economy

Abstract

AbstractIn this study, we estimate the public sector wage premium in a post‐transition economy, a quarter of a century since the collapse of the old regime. Our methodology uses a copula method to estimate the switching regression model, which allows for the relaxation of the restrictive assumption of joint normality. We control for employment selection into both sectors using an instrument based on information regarding learned professions. We use data from the Polish Survey of Earnings by Occupations (2012). Contrary to earlier results for Poland, we found positive selection into employment in both sectors, with positive average treatment effect on the treated and negative average treatment effect on the untreated. The results suggest that both private and public sector employees select themselves into the sector in which they earn more than they would in a counterfactual scenario.