Lahore Journal of Economics

Volume 27, Issue 2,

Winter 2022

Public-Private Wage Differentials: Evidence from Pakistan

Naeem Akram
Assistant Chief,
Ministry of Planning Development and Special Initiatives,
Islamabad, Pakistan.
Email: [email protected]
Citation: “Akram, N. (2023). Public-Private Wage Differentials: Evidence from Pakistan.”
Lahore Journal of Economics, 27(2), 39–64.
https://doi.org/10.35536/lje.2022.v27.i2.a3
Copyright: The Lahore Journal of Economics is an open access journal that distributes its
articles under the terms of the Creative Commons attribution-NonCommercial-Noderivatives
license (http://creativecommons.org/licenses/by-nc-nd/4.0/): this licence permits non-
commercial re-use, distribution, and reproduction in any medium, provided the original work
is properly cited, and is not altered, transformed, or built upon in any way. With this Creative
Commons license in mind, the Lahore Journal of Economics retains the right to publish an
article upon successful completion of the submission and approval process, and with the
consent of the author(s).

Abstract: Compensation structures of public sector employees have significant implications

for public service delivery and employment. If public sector employees get relatively lower
pay, then the government can face difficulties in retaining trained and qualified workers.
However, if public sector employees receive higher salaries it is possible that younger
people may prefer to join the public sector. If this is accompanied by limited job absorption
capacity in the public sector, it is possible for there to be substantial unemployment. This
study has analysed the wage differentials by using the data from the Pakistan Labour Force
Survey 2020-21. Blinder-Oaxaca decomposition suggests that at the executive level, public
sector workers are facing wage penalties, while other occupational groups in the public
sector are enjoying wage premiums. The highest wage premiums are for clerical staff
followed by unskilled workers, services, technician, professionals and agricultural workers.

Keywords: Wages, employment, public sector, private sector.

JEL Classification: J31, E24, J45, L32.
 Public-Private Wage Differentials: Evidence from Pakistan

1. Introduction

The abilities of public servants and the associated incentives can

determine the capability of the state in executing government policies
efficiently. Governments have to make important decisions regarding the
size of their public sectors and remuneration of public sector employees. If
public sector employees are paid less in comparison to employees at
comparatively similar positions in the private sector, then the state can face
difficulties in recruiting and retaining qualified and efficient workers
(Gindling et al., 2020). It has been argued that public servants must be given
salaries that can compete with those in the private sector, and in monetary
renumeration (Dixit, 1997). Offering higher wages may result in a reduction
in the levels of corruption in countries where employees in the public sector
faces relatively compressed wages (Demirgüç-Kunt et al., 2021). Low wages
in public sector may also result in higher inequality in the private sector
(Garibaldiet al., 2021). It is worth noting that colonial empires had
historically paid public sector employees relatively well and this was
accompanied by high levels of public sector performance (Hill, 2007).

On the other hand, if government employees are paid significantly

higher than private sector employees, then there is the concern that wage
premiums will encourage young people entering the workforce to focus on
public sector jobs, which when accompanied by the limited absorptive
capacity of the public sector, may lead to an increase in youth
unemployment. High unemployment rates in the public sector also has
negative implications for the employment in private sector (Behar & Mok,
2019). Moreover, workers may decide to queue for public jobs instead of
joining the private sector which may hinder economic growth (Katz and
Krueger, 1991). However, nepotism in hiring of public-sector employees
may discourage workers from applying for public-sector jobs
(Chassamboulli & Gomes, 2021). It has also been argued that due to high
wages, highly skilled workers join the public sector and private sector
employment is crowded out (Hyder & Reilly, 2005), which in turn can
discourage the private sector from making investments to create jobs,
which leads to higher unemployment and lower GDP growth
(Geromichalos & Kospentaris, 2022). Moreover, higher public expenditure
on salaries can result in the crowding-out of pro-poor expenditures in
developing countries (Zouhar, 2012). High wage premia also creates social
40 Public-Private Wage Differentials: Evidence from Pakistan

inequalities especially if social transfers are limited (IMF, 2018). It is

pertinent to mention that wages are determined keeping in view political
and budgetary considerations, and market forces can play a very limited
role (Depalo et al., 2015). In a very recent study, Chassamboulli & Gomes
(2023) concluded that owing to high wages in the public sector, many
unemployed workers queue for public-sector jobs. On the other hand, if
wages are low in the public sector then the government faces recruitment
problems.

In brief, the pay structure of public sector employees can have a

significant impact on labour market competitiveness and fiscal
sustainability (Depalo et al., 2018). A better understating of wage
differentials in the public and private sector can also have significant
implications for economic development.

High wage premiums in the public sector can help attract and
retain skilled employees, improve service delivery, and, in theory, reduce
corruption. However, it can also pose financial challenges and can run the
risk of creating inequities and negative perceptions among the public.
Striking the right balance and ensuring a fair and transparent
compensation system is essential.

The provision of public sector jobs has always been on the agenda
of successive governments in Pakistan. After its independence in 1947,
Pakistan inherited an agrarian economy, with the process of
industrialization beginning after the 1960; before this, Pakistan’s economy
was unable to generate adequate jobs in the private sector. During this
period, the government became a model employer, in terms of providing
a living wage and job security. Over time, public sector employees were
provided free medical care, housing and (in certain organizations)
ownership of land at the time of retirement. Furthermore, the policy of
nationalization during the 1970s increased the size of the public sector in
Pakistan. Public entities like Pakistan International Airlines (PIA) and the
Pakistan Railways have always employed a large number of civil servants
but are always operating at a loss, which implies that public servants are
less productive in comparison to the private sector. After the 1990s,
successive governments attempted to privatize public sector entitles, but
the process remainly very slow, owing to unions and political pressure.

Job structures in Pakistan’s public and private sectors differ in

several ways, with wage differentials possibly explained by the hedonic
theory of wages (Rosen, 1974). The primary difference between private and
Naeem Akram 41

public sector employment in Pakistan is in regards to pension schemes.

Public sector employees receive higher pension benefits in comparison to
private sector employees. Furthermore, they have more stable jobs and can
only be dismissed in very rare cases. So, public sector jobs remain attractive
for two reasons: job security and pension.

In Pakistan, it is often claimed that public sector employees are

underpaid. If so, then the question arises: Why they are unwilling to leave
their jobs? Why is the demand for public-sector employment still so high?
In this paper, we try to analyse the wage differential between the public
and private sectors and to find out the reasons behind this wage
differential, by using data from the Pakistan Labour Force Survey 2020-21.
Wage differentials have been calculated by using the Blinder–Oaxaca
(1973) decomposition method.

Our results suggest that both male and female public sector
employees enjoy wage premiums. In comparison to male workers, the
wage premium is higher for female workers. The study has further found
that public sector executives are facing wage penalties, whereas other
occupational groups in the public sector are benefitting from wage
premiums. The highest wage premiums are for clerical staff, followed by
unskilled workers, services, technicians, professionals and agricultural
workers. The wage premium is high at the lower end of the wage
distribution and has a decreasing trend with wages. It even becomes a
penalty at the top of the wage distribution. These results imply that some
action may need to be undertaken to ensure that minimum wages be
provided in the private sector. Public sector employees should be given
wages according to their efficiency and value addition. One of the main
policy implications that emerged from this study is that the introduction of
reforms in civil service is necessary.

The paper has been structured as follows: Section 2 presents a

detailed review of the literature related to present study. Section 3 explains
the data, methodology and the estimation technique adopted. In section 4,
the results of descriptive analysis are summarized. The results of the
estimations are discussed in section 5. The last section concludes the study
and provide some recommendations for policymaking.
42 Public-Private Wage Differentials: Evidence from Pakistan

2. Literature Review

Over the years, a number of studies have analyzed the issue of

wage differentials. A brief overview of a selection of those studies is
presented in the section.

Most of the relevant studies found that there exists a significant

wage premium for public sector workers in high-income countries such as
Australia (Cai & Liu, 2011), Italy (Carlo et al., 2005; Depalo & Giordano,
2011) and Ireland (Foley & O’Callaghan, 2011). Elliott et al. (2007) found
that France is facing recruitment and retention problems for highly skilled
workers, with the result that wages in the public sector are high. The
studies also been found that the centralized public sector pay systems of
Italy and Spain act as a regional policy to boost consumption in poorer
areas of the south.

Similarly, a number of studies also confirm the existence of wage

premiums in low and middle-income countries, such as Brazil (Emilio et
al., 2012), Greece (Papapetrou, 2006), India (Azam & Prakash, 2015),
Pakistan (Nasir, 2000; Hyder, 2002; Hyder & Reilly, 2005; Aslam &
Kingdon, 2009), Indonesia (Filmer & Lindauer, 2001) and Romania (Voinea
& Mihaescu, 2012). Glinskaya and Lokshin (2007) estimated that the public
sector wage premium is between 62-102 percent when compared to the
private sector in India. Tansel et al. (2018) found that in Egypt there exist
wage penalties against public sector for men, but wage premiums for
women. Panizza (2001) also finds public sector premiums for female
workers in 13 Latin American countries. Mizala et al. (2011) find a wage
premium for public sector employees in a panel of Latin American
countries. Finan et al. (2015) estimated public sector wage differentials for
32 countries. It has been found that there exists a wage premium for the
public sector in almost every country, although it tends to be higher in low-
income countries.

Bender & Heywood (2010) explained that employee unions in the

public sector are very successful in raising the wages of low-paid
employees. Furthermore, the existence of legislative measures against the
exploitation of workers in the public sector results in higher wages.

On the other hand, in many countries like Estonia (Leping, 2006),

Poland (Adamchik & Bedi, 2000), France (Giordano et al., 2011) and
Germany (Dustmann & van Soest, 1998) the bias appears to run in the
opposite direction, i.e. there exists a public wage penalty or private wage
Naeem Akram 43

premium. Lausev (2014) is of the view that there is a wage penalty for public
sector employees in eastern European countries that transitioned from state
socialism to the free-market during the 1990s. Coppola & Calvo-Gonzalez
(2011) found that there is a wage premium in the public sector in Peru, if all
compensation (bonuses and in-kind payments) are factored in. However, if
we exclude the compensation, then the wage premium turns into a wage
penalty. Blackaby et al. (2017) found that in London and South-Eastern parts
of England public sector workers are facing wage penalties, whereas in other
areas in England public sector workers are enjoying wage premiums.

Christofides & Michael (2013) concluded a wage premium for

public sector employees in 27 European states. Luxembourg, Cyprus,
Greece, Hungary and Estonia have the highest premium while Belgium,
Germany and Norway have some wage penalties. Similarly, Giordano et
al. (2011) also find that Greece, Ireland, Italy, Portugal and Spain exhibit a
wage premium for public sector whereas in France there is a wage penalty
for public sector employees.

Many studies found that public-private wage differentials tend to

decrease over the wage distribution. The wage premium in public sector
for low-paid employees is high, and wage premium decreases with an
increase in wages distribution and turns into a wage penalty for high-paid
employees (Papapetrou, 2006; Cai & Liu, 2011; Christofides & Michael,
2013; Foley & O’Callaghan, 2011; Depalo & Giordano, 2011; Mizala et al.,
2011; Saha, et al., 2014; Azam & Prakash, 2015). Gindling (2020) analyzed
wage differentials for 68 countries by using their national representative
surveys, and found that in most countries, public sector workers are
receiving wage premiums against the private sector. The wage premium is
low for highly skilled workers; in some instances, highly educated and
skilled workers faced wage penalties. It has been further concluded that
the public sector wage premium is high for workers with less education
and skills, and those employed in lower-paid occupations. Miaari (2020)
found that in Palestine, workers at bottom of the wage distribution enjoy
high wage premiums. However, at the top percentiles of the wage
distribution public sector workers face wage penalties. Mancha & Mattos
(2020) found that private-sector employees in Brazil get 13 percent lower
wages in comparison to their public-sector counterparts. However, for
highly skilled employees, those in the private sector get higher wages in
comparison to the public sector. Biesenbeek & van der Werff (2019) have
concluded that in the Netherlands there is a wage premium for low-paid
public sector employees. The wage premium is in favor of private sector
employees for high-paid jobs.
44 Public-Private Wage Differentials: Evidence from Pakistan

Voinea & Mihaescu (2012) found that in Romania, though public

sector wage premium increases from the bottom percentiles, it tends to
decline for only those in the top percentile of workers. Kwenda & Ntuli
(2018) are of the view that in South Africa, the public-private wage
differential starts as a penalty for public sector employees at the bottom of
the wage distribution. The wage premium premiums increase up to the
80th percentile and afterwards start declining.

Depalo et al. (2015) found that employees who had an hourly wage
in the 10th quantile of the wage distribution on average have higher wages
in the public sector. The wage premium in the public sector is estimated at
0.015 for Belgium and 0.348 for Greece. Holm-Hadulla et al. (2010)
calculated a wage premium of 0.209 in Spain.

Pitts et al. (2011) and Dixit (2002) concluded that job satisfaction,
job security and pension are crucial factors in retention in the public sector.
However, financial incentives are also needed (Christensen et al., 2017)
particularly when the private sector offers lucrative jobs (Esteve et al.,
2017). These incentives need not be very lucrative (Pedersen, 2015),
however. Makridis (2021) concludes that in the USA, public sector
employees are enjoying some wage premium but the government is facing
a severe shortage of employees. Due to better management and
development opportunities in the private sector, workers prefer the private
sector over public sector employment. Feeney (2007) also concluded that
red tape, lack of rewards for good work, and other factors matter to a great
extent in discouraging skilled professionals from joining the public sector.

Haque et al. (2021) found that in Pakistan public sector employees

enjoy hefty benefits and privileges in the form of residences in prime
locations (government-owned accommodations have an average market
value of PKR 1.45 trillion - approximately USD 9.5 billion - with an annual
rental value of PKR 10.75 billion), free medical facilities (in addition to
medical allowances, approximately PKR 30 billion per annum is incurred
on payment of medical bills), plots of land after retirement, job security,
and others. If the monetary value of these perks is added, then the wage
of public sector workers is theoretically higher than the employees of the
United Nations and other donor agencies working in Pakistan.

It can be summarized that international comparisons regarding

wage differentials in public and private sectors can be fraught with
difficulties and caveats, as the composition of the public sector, as well as
the attributes of workers, can vary dramatically. However, most of the
Naeem Akram 45

studies found that public sector employees at lower tiers enjoys wage
premiums while at upper tiers public sector employees face wage
penalties. In Pakistan very limited studies were carried out on the issue.
The present study will make a valuable addition in the existing literature
about wage differentials in Pakistan by using the latest data of Pakistan
Labour Force Survey.

3. Data and Methodology

This study has attempted to analyze the determinants of wage

differentials in Pakistan by using the Pakistan Labour Force Survey 2020-
21 (LFS). The Labour Force Survey provides comprehensive information
about the employment, wages, migration, and nature of work environment
of the active and inactive labor force. The Labour Force Survey 2020-21
consists of a sample of 96,442 households. The working-age population (10
years of age and above) was 403,071. The question related to employment
and wages were asked from all the individuals of age 10 and above. The
present study has attempted to analyze the wage differentials by using the
Blinder–Oaxaca (1973) decomposition method. The method involves the
estimation of separate sectoral (public and private) wage equations
according to the Mincer (1958, 1974) wage function, in which individuals’
wages (logged) depend on education and characteristics like region,
occupation, and gender, among others. The functional form of the wage
equation that the present study has used is in equation (1):

𝑙𝑛𝑊 = 𝛼 + 𝛽1 𝑎𝑔𝑒 + 𝛽2 𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 + 𝛽3 𝑟𝑒𝑔𝑖𝑜𝑛 + 𝛽4 𝑀𝑎𝑟𝑖𝑡𝑎𝑙𝑠𝑡𝑎𝑡𝑢𝑠 +

𝛽5 𝑛𝑎𝑡𝑢𝑟𝑒𝑜𝑓𝑤𝑜𝑟𝑘 + 𝜀𝑖 (1)

The model is estimated separately for male and female workers.

After estimation, the average wage differential in private and public
sectors will be decomposed into the explained (attributable to the
differences in characteristics) and unexplained part (attributable to the
differences in the remuneration endowments or wage discrimination) by
using the Blinder–Oaxaca (1973) decomposition.

A brief overview of the variables used in the present study is

summarized below.

Dependent Variables

A worker’s total annual wages is our dependent variable. To apply

the Blinder–Oaxaca (1973) decomposition, the log form of wages has been
46 Public-Private Wage Differentials: Evidence from Pakistan

used. It is pertinent to mention here that it does not include non-monetary

wages.

Independent Variables

i. Level of education

Numerous studies recognized that education plays a pivotal role in

determining household wages. The attainment of education is divided into
six categories; that is no education, below secondary, secondary,
professional, degree or higher education (not professional) and technical
education.

ii. Age of household

The age of the household is another important factor in wage

determination it can be considered a proxy for experience.

iii. Marital Status

Marital status is a binary variable, and takes the value of 1 for “ever
married” households and zero for unmarried households. We have
considered that those who are currently married, widowed or divorced
belong to ever married households.

iv. Locality

We constructed a binary variable assigning the value of 1 for urban

areas and 0 for rural areas. We are expecting that in urban areas wages are
higher.

v. Nature of work

In the survey, the type or manner of work has also been defined. Based on
the data the following broad categories of workers have been made 1)
Executives, 2) Professionals, 3) Technicians and Operators, 4) Clerical staff,
5) Jobs related to Services, 6) Agriculture workers, and 7) Unskilled
workers.

4. Descriptive analysis

Descriptive statistics regarding variables of the present study by

gender are provided in Table 1. Furthermore, in Tables 2 and 3 annual
Naeem Akram 47

wages at different educational levels and different professional types for

males and females are reported.

Table 1: Means of the Variables

Male Female
Variable Private Public Private Public
Sector Sector Sector Sector
Age 33.862 38.854 31.612 35.542
(12.505) (10.646) (11.599) (9.481)
Wage (Annual) 289,137 519,020 225,727 491,190
(309,114) (406,274) (221,230) (359,696)
Region (Urban=1) 0.357 0.409 0.292 0.385
Education
No Education 0.255 0.053 0.356 0.025
Below Secondary 0.293 0.122 0.103 0.036
Secondary & 0.187 0.377 0.075 0.186
Intermediate
Professional 0.004 0.024 0.007 0.043
Degree or higher 0.046 0.299 0.100 0.544
Technical Education 0.215 0.124 0.360 0.166
Marital Status (Ever 0.725 0.865 0.711 0.827
Married=1)
Nature of Work
Executives 0.029 0.060 0.009 0.037
Professionals 0.036 0.252 0.156 0.642
Technicians and 0.194 0.170 0.026
operators 0.025
Clerks 0.009 0.219 0.003 0.226
Services, sales and trade 0.481 0.142 0.557 0.030
Agriculture workers 0.001 0.017 .. 0.001
Unskilled workers 0.250 0.139 0.250 0.040
Source: Author’s calculations. Standard Deviations are reported in parentheses.

Table 1 reveals that on average public sector employees are

relatively older in comparison to private sector employees, with male
workers six years older and female workers four years older, than their
private sector counterparts. There are likely more employment
opportunities in the private sector in comparison to the public sector for
younger people. Furthermore, in comparison to older ones, young people
can easily adjust themselves to the changing nature of jobs in private sector.
Inadequate skills or outdated education make switching from the public to
private sector to older public sector employees very hard.

A greater proportion of employees in the public sector has secondary

education or university degrees. The people having no education or below
48 Public-Private Wage Differentials: Evidence from Pakistan

secondary education are mostly absorbed by private sector. However,

workers having technical education also tend to join the private sector. These
differences can be explained by the private sector's dominance in trade, and
services sectors that do not require very high educational qualifications. It is
noteworthy here that individuals with technical education dominate the
educational structure. Unfortunately, in Pakistan, non-technical and formal
education was encouraged while investment in skills is mostly ignored.
There is a need to encourage young people to invest in technical education
and more technical institutions should be opened across Pakistan to equip
the youth with technical education.

The majority of workers in the public sector are either professionals

or clerks, whereas in the private sector the majority of workers belong to
the services, sales and trade sectors followed by unskilled workers. The
patterns are the same for both male and female workers.

The average wages are higher for public sector workers both male
and female. To comprehensively analyze the wage differentials, we
reported the wage differentials at a different level of education and among
different job types in Table 2 and Table 3 below.

Table 2: Wage differentials at different education levels

Male Female
Private Public Wage No. of Private Public Wage No. of
Sector Sector differe- observa- Sector Sector differe- observa-
ntials tions ntials tions
No 229,026 337,176 67.9 10,037 79,753 316,583 25.2 1,794
education
Below 252,400 358,877 70.3 15,127 112,592 272,700 41.3 607
Secondary
Secondary & 311,321 448,560 69.4 14,761 132,216 383,904 34.4 866
Intermediate
Professional 797,101 1,116,027 71.4 565 678,726 923,385 73.5 129
Degree or 490,220 552,872 88.7 6,280 471,064 529,406 89.0 1,823
higher
Technical 291,624 327,391 89.1 12,917 397,476 449,188 88.5 2,005
Education
Source: Author’s calculations.

Table 2 reveals that wages differentials exist at every level of

education and public sector workers enjoy wage premiums. Net monthly
wages for males in the private sector with no education are 32.1 percent
lower than those in the public sector, and for females the difference increases
Naeem Akram 49

to 74.8 percent. This huge premium especially for females is noteworthy. It

suggests that uneducated female workers are given very small wages in the
private sector. Similarly, for workers who have education below the
secondary level, male workers in the private sector have 29.7 percent lower
wages and female workers have 58.7 percent lower wages in comparison to
their public sector counterparts. With education, the wage differentials
decrease. For higher education and technical education, the wages
differences are relatively small and in the private sector, the workers have
wages that are 11 percent less than the wages of comparable public sector
workers. The public sector advantage stems from the higher remuneration.
However, individuals with a university education and technical education
earn relatively more in the private sector.

The wage differentials regarding the different natures of jobs are

summarized in Table 3.

Table 3: Wage differentials at different natures of jobs

Male Female
Private Public Wage No. of Private Public Wage No. of
Sector Sector differen- observa- Sector Sector differen- observa-
tials tions tials tions
Executives 957,339 953,541 100.4 2,771 716,541 793,324 90.3 141
Professionals 665,604 697,704 95.4 4,881 506,223 543,398 93.2 2,467
Technicians 283,714 489,299 58.0 14,675 216,246 354,957 60.9 578
and operators
Clerks 302,068 460,093 65.7 2,111 316,360 440,978 71.7 70
Services, sales 269,682 428,814 62.9 29,337 92,214 390,349 23.6 2,341
and trade
Agriculture 192,886 337,407 57.2 274 …. 360,000 - 1
workers
Unskilled 193,517 330,198 58.6 5,638 76,928 250,299 30.7 1,626
workers
Source: Author’s calculations.

Table 3 reveals that at the executive level, male private sector

employees receive higher wages in comparison to their public sector
counterparts although the wage penalty for public sector executives is very
marginal. However female executives in the private sector are paid wages
that are 9.7 percent less than executives in the public sector. Similarly, for
professionals, male employees in the private sector earn 4.6 percent less
than public sector professionals and female professionals in the private
sector earn 6.8 percent less than in the public sector. However, in all other
job categories, male workers in the private sector earn 34-42 percent less
50 Public-Private Wage Differentials: Evidence from Pakistan

than the public sector. The highest difference is for clerks wherein clerical
staff working in the private sector earn 34.3 percent less than clerical staff
working in the public sector. The situation is more concerning among
female workers. Female workers in the private sector earn 28-76 percent
less than comparable workers in the public sector. Female private sector
workers belonging to the services, sales, and trade sectors earn 76 percent
less than comparable workers in the public sector. A similar position exists
among unskilled female workers where they are paid 69.3 percent less than
in the public sector.

5. Estimation Results

The results of wage function of male and female workers in the

public and private sectors are reported in Table 4.

Table 4: OLS Estimation Results1

Male Female
Private Sector Public Sector Private Sector Public Sector
Coeffic- P Coeffic- P Coeffic- P Coeffic- P
ient Value ient Value ient Value ient Value
Education (No Education as baseline)
Below -0.4843 0.1627 0.0678 0.3450 -1.2880 0.4210 0.1068 0.3270
Secondary
Secondary & -0.3162* 0.0000 0.2336* 0.0000 -1.4440* 0.0000 0.2149** 0.0930
Intermediate
Professional 0.6427* 0.0000 0.7519* 0.0000 0.6412* 0.0000 0.9397* 0.0000
Degree or 0.6260* 0.0000 0.3880* 0.0000 0.0851* 0.0000 0.3508* 0.0070
higher
Technical 0.3672* 0.0000 0.2874* 0.0000 0.5719* 0.0000 0.3580* 0.0060
Education
and Training
Age 0.0079* 0.0000 0.0152* 0.0000 0.0133* 0.0000 0.0154* 0.0000
Region 0.1817* 0.0000 0.0703* 0.0000 0.3536* 0.0000 0.0815* 0.0000
(Urban Areas
=1)
Marital 0.1655* 0.0000 0.0058 0.7290 -0.1112* 0.0010 -0.0285 0.3030
Status (Ever
Married=1)
Nature of Job (Unskilled workers as baseline)
Executives 0.4149* 0.0000 0.8654* 0.0000 0.5163* 0.0000 0.4290 0.0000
Professionals 0.5323* 0.0000 0.7937* 0.0000 0.8438* 0.0208 0.2232 0.0019
Technicians 0.3471 0.7840 0.5547* 0.0000 0.0159** 0.0920 0.0710 0.0000
and
operators

1
Log wages has been used as dependent variable.
Naeem Akram 51

Male Female
Private Sector Public Sector Private Sector Public Sector
Coeffic- P Coeffic- P Coeffic- P Coeffic- P
ient Value ient Value ient Value ient Value
Clerks 0.1082* 0.0000 0.0898* 0.0000 0.1140 0.4480 0.0619 0.0000
Services, 0.0609* 0.0040 0.0638* 0.0000 0.0877* 0.0000 0.1094 0.0030
sales and
trade
Agriculture 0.1357 0.1930 -0.7818** 0.0954 0.4958 0.5510 0.0842 0.1920
workers
Constant 12.2885* 0.0000 12.6660* 0.0000 13.3503 0.0000 12.1665 0.0000
F- Statistic 463.46 --- 338.43 --- 201.23 --- 28.33 ---
P Value of F- 0.0000 --- 0.0000 --- 0.0000 --- 0.0000 ---
Statistic
R Square 0.2670 --- 0.3819 --- 0.2935 --- 0.3840 ---
Number of 49,493 10,194 5,396 1,828
Observations
Source: Author’s calculations.
* denotes significance at 5% level

The results in Table 4 indicate that the importance of education

varies in the public and private sectors at different levels of education.
Except for professional education, the coefficients for different levels of
education in public sector are relatively small in comparison to the private
sector. Both in the public and private sectors, education below the
secondary level does not yield significant wage premiums. However, the
wage premium for secondary and intermediate education is 23.4 percent
in the public sector and a wage penalty of 31.6 percent in the private sector.
But there is exists a large imbalance between demand and supply of jobs
for individuals with secondary/intermediate education and even at higher
education levels (Farooq, 2011; Qayyum, 2007), driving down private
sector wages. Up until 1990, it was argued that in Pakistan a supply of
educated labor had been matching the demand of labor force. However,
after the 1990s, and due to sluggish economic growth, Pakistan finds itself
unable to create demand for its growing labor force (Uzair-ul-Hassan &
Noreen, 2013). As a consequence, due to mismatching in the labor market,
workers in the private sector with intermediate and secondary education
are unable to receive better salaries. As far as those with professional and
higher education are concerned, workers in the private sector enjoy a very
high premium of more than 60 percent, whereas workers in the public
sector with professional education enjoy a wage premium of 75 percent.
On the other hand, those with a degree or higher education have a wage
premium of a mere 38.8 percent. These results are supported by the
52 Public-Private Wage Differentials: Evidence from Pakistan

findings of Gindling (2020), who found that public sector wage premiums
vary with the level of education.

The results indicate that training and attaining technical education

also exhibit a positive impact on wages. In comparison to the public sector,
the relative impact is high in the private sector as it yields a premium of
36.7 percent and 57.2 percent for male and female workers respectively,
while this premium is 28.7 percent and 35.8 percent for men and women in
the public sector. These associated returns with training suggest that after
training employees may receive benefits in the form of increments,
promotions, or additional allowances.

The estimated coefficient for age (used as a proxy for experience) is

significant in both the public as well as in the private sectors. High wages
associated with age are in the public sector. It reveals that each year of
experience for workers in the public sector yield an addition 2 percent
wage premiums. However, in private sector, this premium is almost half.
It is worth mentioning here that our results support the human capital
theory of wages proposed by Mincer (1974) as education, age, and training
have a significant positive impact on wages.

There are factors other than human capital factors that also affect
the wages of workers. The results indicate that in urban areas wages are
significantly higher than wages in the rural areas. Male workers in urban
areas enjoy a wage premium of 18.2 percent in the private sector and 7
percent in the public sector. Female workers belonging to urban areas in
the private sector receive a relatively higher wage premium of 35.3 percent
while in the public sector it is similar to male workers. The low wage
premium in the public sector is because there are very marginal differences
in wages between urban and rural area workers. The high wage premium
of female workers in the private sector indicates that in rural areas females
are paid very little. However, these findings are contradictory to the
findings of Blackaby et al. (2017) and Elliott et al. (2007), who find that
public sector wages are higher in rural areas in contrast to urban areas.

The wage premium of married male workers in private sector is 16.6

percent. However, for female workers in the private sector instead of a
wage premium there is a wage penalty of 11.1 percent. It is possible that
female workers face family pressures after marriage leading them to face
wage penalties. It has been found that, in the public sector, marriage has
no significant impact on wages. These results may be because the public
sector in Pakistan puts less emphasis on productivity and efficiency in
Naeem Akram 53

determining wages or promotions or because the public sector allows

greater flexibility to female workers after marriage.

The coefficients of different occupations suggest that in the private sector,

the highest wage premium for male workers is in the worker’s groups of
professionals (53%), followed by executives (41%) and technicians (34%).
Female technicians do not enjoy any wage premium in the private sector.
The results also reveal that in public sector highest premium is for
executives followed by professionals and technicians. The results also
indicate that in both public and private sectors, agricultural workers does
not enjoy any wage premium. The high value of R-squared and statistically
significant F-statistic indicate the goodness of fit and model specifications.

Table 5: Blinder-Oaxaca Decomposition

Male Female
Coefficient Standard P Value Coefficient Standard P Value
Error Error
Differential
Private sector 12.2961* 0.0037 0.0000 11.2259* 0.0140 0.0000
Public sector 13.0257* 0.0048 0.0000 12.5771* 0.0113 0.0000
Difference -0.7297* 0.0061 0.0000 -1.3512* 0.0180 0.0000
Decomposition
Endowments -0.1603* 0.0060 0.0000 -0.2143* 0.0277 0.0000
Coefficients -0.6616* 0.0079 0.0000 -0.9790* 0.0278 0.0000
Interaction -0.0077* 0.0079 0.3290 -0.1579* 0.0357 0.0000
Source: Author’s calculations.
* denotes significance at 5% level

After estimating the wage equation, the Blinder-Oaxaca

decomposition has been carried out the results are summarized in Table 5.
The results in Table 5 indicate that, in comparison to the private sector,
both male and female public sector employees enjoy wage premiums. The
wage premium is high for female workers in comparison to male workers.
There is a log difference of 0.72 between the public and private sector
employees. This difference is decomposed into an unexplained
component, an endowment, and an interaction between the two. It
suggests that, for male workers, the majority of variation (77%) is due to
the unexplained component. The employee-specific attributes included in
the regression (endowment effect) explain 22 percent of the variation in
male workers’ wages. However, only 1 percent of the variation is
explained by the interaction term, that is, differences in the returns of the
workers.
54 Public-Private Wage Differentials: Evidence from Pakistan

For female workers there is a log difference of 1.35 among the

public and private sectors. 72.5 percent of the variation is due to the
unexplained component, 15.9 percent is due to the endowment effect and
11.7 percent of the variation is accounted for by the returns of the workers.

The results in Table 5 indicate that productivity or returns have

almost no role in explaining high wages among male public sector
employees. Although female workers' productivity plays an important role
in explaining variation in public and private sector employment; yet its
share is less than employee-specific characteristics.

The Blinder-Oaxaca decomposition in the wage of the public and

private sectors in different types of jobs may be analyzed. The results are
summarized in Table 6 below.

Table 6: Blinder-Oaxaca Decomposition of different professions

Executives Professionals Technicians Clerks Services Agricultural Unskilled

Workers workers
Differential
Private 13.629* 12.502* 12.348* 12.210* 12.168* 12.115* 11.562*
sector
Public sector 13.067* 12.977* 12.943* 13.244* 12.898* 12.427* 12.628*
Difference 0.561* -0.476* -0.596* -1.034* -0.730* -0.312* -1.066*
Decomposition
Endowments 0.143* -0.092* -0.092* -0.217* -0.124* -0.037* -0.170*
Coefficients 0.334* -0.342* -0.481* -0.825* -0.560* -0.279* -0.687*
Interaction 0.085 -0.041* -0.023 0.008 -0.046* -0.005* -0.208*
Source: Author’s calculations.
* denotes significance at 5% level

Table 6 reveals that executives working in the public sector are facing
wage penalties while in all other types of jobs, public sector employees are
getting higher wages in comparison to private sector employees. The highest
wage premium is for clerical staff followed by unskilled workers, services,
technicians, professionals, and agriculture workers.

6. Discussion and policy implications

Public sector employees play a pivotal role in the economic

development of a country. The salary structure in the public sector has
implications for the smooth execution of state policies. If public sector
employees get less pay in comparison to their private counterparts, then it
becomes difficult for the government to recruit and retain trained and
Naeem Akram 55

qualified workers. However, if public sector employees get higher salaries

than the private sector then these wage premiums will encourage young
people to join the public sector. But as the public sector has limited job
absorption capacity which could cause unemployment to increase. In
Pakistan, the majority of public sector workers are dissatisfied with their
pay. It has always been argued that they are underpaid in comparison to
the private sector. Surprisingly despite all the complaints about low salary,
the majority of public sector employees prefer to remain in the civil service.
The present study is an attempt to analyze the wage differentials between
public and private sector employees by using data from the Pakistan
Labour Force Survey 2020-21.

The results indicate that the relationship of education with wages

varies by level of education. In both the public and private sectors, workers
with education below the secondary level do not receive significant wage
premiums. In the private sector, there is a wage penalty for workers with
secondary and intermediate levels of education. However, at all other
levels of education, both public and private sector employees enjoy wage
premiums.

Experience proxied by age also yields wage premium. However,

the public sector premium for experience is almost double that found in
the private sector. It has also been concluded that in urban areas, wages are
significantly high. The study concludes that there is a wage premium for
married male workers in private sector however for females there is a wage
penalty. It has also been found that in public sector marriage has no
significant impact on wages. The study also reveals that the greatest
premium in the private sector is received by professionals while in the
public sector, the highest premium is paid to executives.

The results of Blinder-Oaxaca's decomposition suggest that both

male and female public sector employees enjoy wage premiums. The wage
premium for male workers is higher than that for female workers. The
decomposition further illustrates that the majority of the variation in wages
is due to the unexplained component (more than 70%). The employee-
specific attributes included in the regression explain 15-20 percent of the
variation. However, very limited variation is explained by the interaction
term, i.e. differences in returns of the workers. It indicates that productivity
or returns have a very limited role in the high wages of public sector
employees.
56 Public-Private Wage Differentials: Evidence from Pakistan

The study has further analyzed wage differentials in different

occupations. It has been found that public sector executives are facing
wage penalties, while other occupational groups in the public sector are
enjoying wage premiums. The highest wage premiums are for clerical staff
followed by unskilled workers, services, technicians, professionals, and
agricultural workers. It can be concluded that the wage premium varies
across the occupational distribution. The wage premium is high at the
lower end of wage distribution and is decreasing with the level of wages.
This then becomes a penalty at the top of the wage distribution. Many other
studies also found that wage premiums in the public sector for low-paid
employees are high and wage premiums decrease with an increase in wage
distribution, and turn into wage penalties for high-paid employees (Cai &
Liu, 2011; Christofides & Michael, 2013; Saha, et al., 2014; Azam & Prakash,
2015; Gindling, 2020).

It is worth mentioning here that the study has certain limitations.

The present study has not accounted for perks and privileges given to
public sector employees in terms of free residence in prime areas, use of
cars (outside car monetization like the use of project cars, for example), free
petrol, household staff, free telephones, among other perks. There is a
likelihood that if these privileges and subsidies were included then the
wage premiums would significantly change. Similarly, the present study
has used the data of the labor force 2020-21. In July 2022, the government
began to provide an executive allowance to federal employees amounting
to 150 percent of their salaries. If this executive allowance and in-kind
perks and privileges are included in the salaries of the public sector
executives, then it is possible that instead of facing wage penalties,
executives working in the public sector will also enjoy wage premiums.
Additionally, among the most important features of working for the public
sector are job security (and if we account for pensions then financial
security may even turn into an inheritance in certain cases) and social
status. It adds a lot of value to the public sector but in monetary terms, it
becomes very hard to measure.

Based on the results of the present study various policy

implications can be drawn. Some of the key takeaways from the present
analysis are as under:

i. The low wages in private sector reflect that workers in the private
sector are exploited. There is a dire need that some actions may be
taken to ensure that an effective minimum wages be given in the
private sector. There is also a need that workers may be educated about
Naeem Akram 57

their rights and be given protective cover like old age benefits and
health insurance.

ii. Public sector employees should be given wages according to their

efficiency and value addition. If incentives are not given to more
productive workers, then the productivity of more productive workers
will converge to that of lower productivity workers who get the same
salaries.

iii. High wage premiums to public sector employees have severe

consequences for the overall fiscal position of the government. The pay
and pension bill in Pakistan has become difficult to sustain and there is
a need for reforms. The reduction in government payrolls can be
achieved by either reducing the size of the government or reducing
wages. It is very hard to make cuts in wages. However, the size of the
government can be reduced by cutting unnecessary positions and
introducing of E-office management system.

iv. Besides the associated fiscal burden incurred due to wage premiums to
public sector, the issue of equity also emerges. These unequal wages
encourage youth to wait for secure public sector jobs instead of joining
the comparatively uncertain private sector. Consequently, the young
labor force is unable to play its role in economic development. There is
a need that awareness campaigns and policies may be launched to
promote entrepreneurship and private-sector employment.

v. The findings of the study hint towards gender base wage

discrimination against women in private sector. Gender-based
discrimination of any type is a violation of labor laws. It is suggested
that strict enforcement of equal wages for male and female workers
may be ensured in private the sector; furthermore, awareness may be
raised among women about their rights.

vi. One of the main policy implications that emerged from present study
is that whenever reforms in the civil service are introduced, civil
servants demand to increase their cash salaries and try to protect the
in-kind perk and privileges intact or attempt to increase them (Haque
& Din, 2006). Furthermore, they also encourage seniority-based
promotions rather than competence or performance-based promotions.
There is a need that in-kind perks and privileges may be monetized.
For example, the houses given to public sector employees may be
discontinued, and all the government accommodations may be
58 Public-Private Wage Differentials: Evidence from Pakistan

auctioned and these funds may be invested to finance pension bills.

However, employees may be given competitive or market-based house
rent. Instead of providing medical allowances along with free medical
facilities, health insurance may be introduced for the employees. It is
suggested that instead of pay and pension reforms holistic evidence-
based reforms are needed to bring professionalism and automation in
the public sector.

In the wage equation, the present study has tried to control

different types of jobs and workers' characteristics and tried to capture the
occupational structure, yet many unobserved factors still play a role in the
wage differentials of the public and private sectors. It is suggested that
future studies may be conducted that may capture the motivation to work,
job security, after-retirement benefits, among other factors, in the wage
equation. Furthermore, future research can look at the relationship
between the wage premium of public sector employees and competency in
policy formulation and implementation capacities. Also, one could test to
see if high wages in the public sector provide an incentive for higher
productivity and if they reduce corruption.

Conflict of interest

The views presented in the paper are personal and do not reflect the views
of author’s affiliated institution in any respect.
Naeem Akram 59

References

Adamchik, V. A., & Bedi A. S. (2000). “Wage Differentials between the

Public and the Private Sectors: Evidence from an Economy in
Transition.” Labour Economics, 7 (2), 203-224.

Aslam, M., & Kingdon G. (2009). “Public–Private Sector Segmentation in

the Pakistani Labour Market.” Journal of Asian Economics, 20 (1), 34-
49.

Azam, M., & Prakash N. (2015). “A Distributional Analysis of Public-

Private Wage Differentials in India.” Labour, 29 (4), 394-414.

Behar, A., & Mok, J. (2019). “Does public‐sector employment fully crowd
out private‐sector employment?”. Review of Development
Economics, 23(4), 1891-1925.

Bender, K., & Heywood, J. (2010). “Out of balance? Comparing public and
private sector compensation over 20 years”. Centre for State and
Local Government Excellence, Washington, DC

Biesenbeek, C., & van der Werff, S. (2019). “Public–private wage

differentials: Evidence from the Netherlands”. De Economist, 167(1),
23-43.

Blackaby, D., Murphy, P., O’Leary, N., & Staneva, A. (2018). “Regional
pay? The public/private sector pay differential”. Regional Studies,
52(4), 477-489.

Blinder, A. S. (1973). “Wage discrimination: Reduced form and structural

estimates”. Journal of Human Resources, 8: 436-455.

Cai, L., & Liu, A. Y. C. (2011). “Public–private sector wage gap in Australia:
Variation along the distribution”. British Journal of Industrial
Relations, 49, 362-390.

Carlo, D. A., Lucifora, C. and Origo F. (2005). “Public Sector Pay and
Regional Competitiveness: A First Look at Regional Public- Private
Wage Differentials in Italy” (No. 1828). Institute for the Study of
Labor (IZA).

Chassamboulli, A., Gomes, P. (2021) “Jumping the queue: Nepotism and

public-sector pay”, Review of Economic Dynamics, 39, 344-366
60 Public-Private Wage Differentials: Evidence from Pakistan

Chassamboulli, A., & Gomes, P. (2023) “Public-sector employment, wages

and education decisions”, Labour Economics, 82,
https://doi.org/10.1016/j.labeco.2023.102345.

Christofides, L. N., & Michael, M. (2013). Exploring the public-private

sector wage gap in European countries. IZA Journal of European
Labor Studies, 2(1), 1-53 https://doi.org/10.1 186/2193‐9012‐2‐15

Christensen, C., Waldeck, A., & Fogg, R. (2017). How disruptive innovation
can finally revolutionize healthcare. A Plan for Incumbents and Start-
Ups to Build a Future of Better Health and Lower Costs.

Coppola, A., & Calvo-González, O. (2011). Higher wages, lower pay: Public
vs. Private sector compensation in Peru. World Bank Policy Research
Working Paper, (5858).

Demirgüç-Kunt, A., Lokshin, M., and Kolchin, V. (2021). “Effects of Public

Sector Wages on Corruption: Wage Inequality Matters”. World
Bank Policy Research Working Paper No 9643,
http://dx.doi.org/10.2139/ssrn.3838088

Depalo, D., and Giordano, R. (2011). “The Public-Private Pay Gap: A

Robust Quantile Approach.” Bank of Italy Temi di Discussione,
Working Paper No 824.

Depalo, D., Giordano, R., & Papapetrou, E. (2015). “Public–private wage

differentials in euro-area countries: Evidence from quantile
decomposition analysis”. Empirical Economics, 49(3), 985-1015.

Depalo, D., & Pereda-Fernández, S. (2018). “Consistent estimates of the

public/private wage gap”. Empirical Economics. https
://doi.org/10.1007/s0018 1-018-1592-7

Dixit, A., Gene, G. & Helpman, E. (1997). “Common Agency and

Coordination: General Theory and Application to Government
Policy Making”. Journal of Political Economy, 105(4),752-769.

Dixit, A. (2002). “Incentives and Organizations in the Public Sector: An

Interpretative Review”. The Journal of Human Resources, 37(4), 696 -
727.
Naeem Akram 61

Dustmann, C & Van Soest A. (1998). “Public and Private Sector Wages of
Male Workers in Germany”. European Economic Review 42 (8), 1417-
1441.

Elliott, R., Mavromaras, K., & Meurs, D. (2007). Special issue on public
sector pay structures and regional competitiveness, Manchester
School, 75, 373–385. doi:10.1111/j.1467-9957.2007.01022.x

Emilio, D., Ponczek, V., & Botelho. F. (2012). “Evaluating the Wage
Differential between Public and Private Sectors in Brazil.” Revista
De Economia Política, 32 (1), 72-86.

Esteve, M., Schuster, C., Albareda, A., & Losada, C. (2017). The effects of
doing more with less in the public sector: Evidence from a large‐
scale survey. Public Administration Review, 77(4), 544-553

Farooq S. (2011) “Mismatch between Education and Occupation: A Case

Study of Pakistani Graduates”, The Pakistan Development Review,
50(4), 531–553

Feeney, B. C. (2007). The dependency paradox in close relationships:

accepting dependence promotes independence. Journal of
Personality and Social Psychology, 92(2), 268.

Filmer, D., & Lindauer, D. (2001). “Does Indonesia Have a ‘Low Pay’ Civil
Service?”, Bulletin of Indonesian Economic Studies, 37 (2), 189‐205

Finan, F. , Olken, B. & Pande, R. (2015). “The Personnel Economics of the

State”, National Bureau of Economic Research Working Paper
21825

Foley, P., & O’Callaghan, F. (2011). “Investigating the Public-Private Wage

Gap in Ireland Using Data from the National Employment Survey
2007.” Journal of the Statistical and Social Inquiry Society of Ireland, 39:
23-52.

Garibaldi, P., Gomes, P. & Sopraseuth, T. (2021) “Public employment

redux,”, Journal of Government and Economics, 1,
https://doi.org/10.1016/j.jge.2021.100003.

Geromichalos, A., & Kospentaris, I. (2022) “The unintended consequences

of meritocratic government hiring”, European Economic Review, 144,
https://doi.org/10.1016/j.euroecorev.2022.104093.
62 Public-Private Wage Differentials: Evidence from Pakistan

Gindling, T. H., Hasnain, Z., Newhouse, D., & Shi, R. (2020). Are public
sector workers in developing countries overpaid? Evidence from a
new global dataset. World Development, 126, 104737.

Giordano, R., Depalo, D., Pereira, M., Eugène, B., Papapetrou, E., Perez, J.
and Roter, M. (2011). “The public sector pay gap in a selection of
Euro area countries” Working Paper Series No. 1406, Frankfurt:
European Central Bank (ECB).

Glinskaya, E. & Lokshin, M. (2005). “Wage differentials between the public

and private sector in India”, Policy Research Working Paper 3574,
The World Bank Washington DC

Uzair-ul-Hassan, M., & Noreen, Z. (2013). Educational Mismatch between

Graduates' Possessed Skills and Market Demands in Pakistan.
International Education Studies, 6(11), 122-129.

Haque, N.U., Nayab, D., Siddique, O. and Faraz, N. (2021). Cash Poor, Perk
(Plots, Privileges) Rich! Civil Service Compensation: Incentives,
Dissatisfaction, and Costs (No. 2021: 45). Pakistan Institute of
Development Economics. Accessed on 16th March 2023 at
https://www.pide.org.pk/pdf/reports/Civil-Service-
Compensation-Report.pdf

Haque, N. & Din M. (2006) “Public Sector Efficiency: Perspective on Civil

Service Reform”. Islamabad: Pakistan Institute of Development
Economics

Hill, J. P. (2007). The Agency Problem of Empire: British Bureaucracy and

Institutional Path Dependence (Unpublished doctoral dissertation).
George Mason University, Fairfax, VA, USA.

Holm-Hadulla, F., Kamath, K., Lamo, A., Pérez, J. J., & Schuknecht, L.
(2010). Public wages in the euro area: towards securing stability and
competitiveness. ECB Occasional Paper, (112).

Hyder, A. (2002). “Public-Private Wage Differentials in Pakistan.” The

Bangladesh Development Studies, 28 (4), 79-93.

Hyder, A., & Reilly B. (2005). “The Public and Private Sector Pay Gap in
Pakistan: A Quantile Regression Analysis.” The Pakistan
Development Review, 271-306.
Naeem Akram 63

IMF (2018) “Public Wage Bills in the Middle East and Central Asia”. MCD
Departmental Paper Series.

Katz, L. F., and Krueger, A. B. (1991). “Changes in the structure of wages

in the public and private sector”. NBER working papers No 3667.

Kwenda, P., & Ntuli, M. (2018). A detailed decomposition analysis of the

public-private sector wage gap in South Africa. Development
Southern Africa, 35(6), 815-838.

Leping, K. O. (2006). “Evolution of the Public–Private Sector Wage

Differential during Transition in Estonia.” Post-Communist
Economies,18 (4), 419-436.

Makridis, C. A. (2021). (Why) is there a public/private pay gap? Journal of

Government and Economics, 1, 100002.

Mancha, A., & Mattos, E. (2020). Public versus private wage differential in
Brazilian public firms. EconomiA, 21(1), 1-17.

Miaari, S. H. (2020). An analysis of the public–private wage differential in

the Palestinian labour market. Defence and Peace Economics, 31(3),
289-314.

Mincer J. (1958) "Investment in human capital and the personal income

distribution," Journal of Political Economy, 66, 281-302

Mincer J. (1974) “Schooling, Experience, and Earnings”, Columbia

University Press for the National Bureau of Economic Research,
New York

Mizala, A., Romaguera, P. and Gallegos, S. (2011). “Public–Private Wage

Gap in Latin America (1992–2007): A Matching Approach.” Labour
Economics, 18, 115-131

Nasir, Z. M. (2000). “Earnings differential between public and private

sectors in Pakistan”. The Pakistan Development Review, 39(2), 111-
130.

Navarro, L. and Tejada, M. (2022) "Does Public Sector Employment Buffer

the Minimum Wage Effects?," Review of Economic Dynamics, 43, 168-
196
64 Public-Private Wage Differentials: Evidence from Pakistan

Oaxaca, R. (1973). “Male–female wage differentials in urban labour

markets”. International Economic Review, 14, 693-709.

Panizza, U. (2001), “Public Sector Wages and Bureaucratic Quality:

Evidence from Latin America”, Economía, 2(1), 97-139.

Papapetrou, E. (2006). “The Public-Private Sector Pay Differential in

Greece.” Public Finance Review, 34 (4), 450-473.

Pedersen, H. S. (2016). Are PhDs winners or losers? Wage premiums for

doctoral degrees in private sector employment. Higher Education,
71, 269-287.

Qayyum, A. (2007) Growth Diagnostics in Pakistan. Pakistan Institute of

Development of Economics, Islamabad. (PIDE Working Paper
2006-07).

Rosen, S. (1974). “Hedonic Prices and Implicit Markets: Product

Differentiation in Pure Competition”. Journal of Political Economy,
82(1), 34-55

Saha, S., Roy, P. & Kar, S. (2014). “Public and Private Sector Jobs,
Unreported Income and Consumption Gap in India: Evidence from
Micro-Data.” The North American Journal of Economics and Finance,
29, 285-300.

Tansel, A., Keskin, H. I., and. Ozdemir Z. A (2018), “Public versus private
sector wage gap in Egypt: Evidence from Quantile Regression on
panel data,” IZA Discussion Paper No. 11895

Voinea, L., & Mihaescu, F. (2012). “A Contribution to the Public–Private

Wage Inequality Debate.” Economics of Transition, 20 (2), 315-337.

Zouhar, Y. (2012). “Inclusive Growth in Mauritania” Selected Issues Paper.

IMF Country Report No. 12/249.