Public-private sector wage gap in a group of European countries: an empirical perspective

This paper investigates the impact of the great recession of 2007-2009 and the debt crisis on the evolution of wages in the public and the private sectors, and the changes in the public-private sector pay gap in a group of 26 EU countries. The results indicate that earnings decreased in both sectors in most of the analysed countries between 2008 and 2013. However, the decline in wages was mostly due to the differences in returns to workers' and jobs' characteristics while the endowment effect affected earnings in the opposite direction. The findings suggest that the overall public-private wage gap reduced or remained unchanged in the majority of the European countries over the crisis, which was due to diminishing differences in the observed characteristics of workers and their jobs as well as shrinking positive discrimination of public employees.