Description: Are Public Sector Workers Underpaid? Appropriate Comparators in a Developing Country

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Are Public Sector Workers Underpaid? Appropriate Comparators in a Developing Country

How is public sector compensation best aligned with the market? In industrial countries a common reference is the salary paid by private employers for similar jobs (the "jobs approach"). But comparable jobs are formal, and in developing c...

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Bibliographic Details
Main Authors:	Bales, Sarah, Rama, Martin
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	WORKERS' COMPENSATION PUBLIC SECTOR WAGES COMPARATIVE ECONOMICS DEVELOPING COUNTRIES LABOR MARKETS PUBLIC SECTOR MANAGEMENT EMPLOYMENT & INCOME FORMAL SECTOR INFORMAL SECTOR ECONOMETRIC MODELS STATE-OWNED ENTERPRISES POLITICAL BIAS DOWNSIZING OF ORGANIZATIONS COMMUNITY CHARACTERISTICS DATA ANALYSIS DATA SETS DEPENDENT VARIABLE DEVELOPING COUNTRY DISTRIBUTION FUNCTIONS ECONOMETRIC ANALYSIS ECONOMETRIC ISSUES ECONOMETRIC MODEL EDUCATIONAL ATTAINMENT EFFICIENT PUBLIC SECTOR DOWNSIZING EMPIRICAL ANALYSIS EMPLOYMENT EMPLOYMENT STATUS EXPENDITURES EXPLANATORY VARIABLES FAMILIES FOREIGN COMPANIES GEOGRAPHICAL AREA HEALTH PROGRAMS HOUSEHOLD CHARACTERISTICS HOUSEHOLD CONSUMPTION HOUSEHOLD DATA HOUSEHOLD QUESTIONNAIRE HOUSEHOLD SURVEY HUMAN DEVELOPMENT INCOME INCOME TRANSFER INCOMES INFORMAL ACTIVITIES INFORMAL SECTOR EMPLOYMENT INTERNATIONAL STANDARDS JOB SEPARATION LABOR FORCE LABOR FORCE PARTICIPATION LABOR MARKET LABOR MARKET REGULATIONS LABOR PRODUCTIVITY LIVING STANDARDS LIVING STANDARDS MEASUREMENT LOCAL LEVEL MARKET ECONOMY MODEL ESTIMATION MOTIVATION NORMAL DISTRIBUTION NUTRITION POLICY MAKERS POLICY MEASURES POLICY RESEARCH POSITIVE VALUE PRIVATE SECTOR PRIVATE SECTOR EARNINGS PRIVATE SECTOR WORKERS PRIVATE SECTORS PUBLIC SECTOR PUBLIC SECTOR COMPENSATION PUBLIC SECTOR REFORM PUBLIC SERVICES RANDOM EFFECTS REFORM PROGRAM REFORM PROGRAMS REGIONAL DUMMIES REGIONAL LEVEL REPRESENTATIVE SURVEY RETIREMENT RURAL AREAS SAMPLE SELECTION SECTOR EMPLOYMENT SELECTION BIAS SKILLED WORKER SOCIAL PROTECTION STATISTICAL OFFICE TRANSITION COUNTRIES UNIVERSITY GRADUATES URBAN AREAS VOCATIONAL TRAINING WATER SUPPLY WORKERS YOUNG WORKERS
Online Access:	http://documents.worldbank.org/curated/en/2001/12/1662737/public-sector-workers-underpaid-appropriate-comparators-developing-country http://hdl.handle.net/10986/19338

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Summary:	How is public sector compensation best aligned with the market? In industrial countries a common reference is the salary paid by private employers for similar jobs (the "jobs approach"). But comparable jobs are formal, and in developing countries the relevant alternative for many public sector workers is informal sector employment. Another approach uses as a reference, the earnings of similar workers in the private sector, regardless of whether their jobs are formal, or informal (the "workers approach"). A potential shortcoming of this approach is that workers may differ in characteristics that are unobservable. The authors assess the importance of this shortcoming, by relying on five econometric methods, four of which correct the bias from unobservable characteristics. The authors focus on state-owned enterprises in Vietnam, which recruited workers on the basis of political loyalty, and other unobservable characteristics. A massive downsizing program, which led to the departure of the most entrepreneurial workers, may have exacerbated the selection bias. However, all the results obtained with the workers approach, fall within a relatively narrow range. They suggest that workers in state-owned enterprises, are overpaid by twenty percent, or more. In contrast, the jobs approach indicates that they could earn two, to six times more in the private sector.