Public–Private Wage Differentials: Evidence from The Netherlands

Abstract

This study analyzes public–private wage differentials in The Netherlands between 2006 and 2017. We use OLS and simultaneous quantile regression models to compare gross hourly wages of employees at different quantiles of the wage distribution. Our study adds to the body of literature explaining public–private wage differentials because it is one of the first studies that looks at public–private wage differentials before, during and after the financial crisis. We find public–private wage differentials in favor of the public sector for low-wage employees and in favor of the private sector for high-wage employees in all research years. Public sector wages deteriorated substantially for all quantiles between 2011 and 2014, when public sector wages were officially frozen due to budgetary constraints. From 2015 onwards, public sector wages more than caught up with those in the private sector. In 2017, wages for the median employee were higher in the public sector, contrary to previous years.