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Public-Sector Wage Premium in Poland

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Gabriela Grotkowska

This book assesses the size, structure and evolution of the public-private wage gap in Poland – a country frequently regarded as an example of a successful transition from a centrally planned economy to a market economy. The author extensively elaborates on the issue of the selection of employment, and reviews the available studies concerning the public-private wage gap in developed and developing countries, with a particular attention to the evolution of methodology. Furthermore, the author examines recent empirical studies on the public-sector wage premium. Contrary to former research, they have provided positive estimates of the average public-sector wage premium, with significant differences in terms of employee characteristics and local labour market conditions.

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Chapter 1 Evolution of the public sector in Poland during the period of economic transition

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One of the most important aspects of the economic transition from a centrally planned economy to a market-oriented economy in Poland is privatization. Similarly to other Central European countries, the country’s increasing share of the GDP is yielded by the private sector.1 This is the result of Poles’ individual entrepreneurial activity, a decline in the number of public companies (particularly at the beginning of the transition period) and the transformation of state-owned enterprises into private ones, with the use of domestic and foreign capital. Consequently, 25 years after the beginning of the economic transition, the public sector in Poland is considerably smaller (in terms of production and employment) than it used to be at the turn of the 1980s and the beginning of the 1990s. Simultaneously, the employment structure in this sector has considerably changed, in terms of demand and supply of the labour market.

The aim of this chapter is to present the current size and structure of public-sector employment in Poland, discuss its evolution during the transition period and highlight the differences between the public sector in Poland and other countries. The final part of the chapter concludes by identifying the employment structure implications on wages in the public sector, which is a starting point for the analysis of the public-sector wage premium, as discussed in the following chapters.

1.1. Shrinkage of the public sector

Although methodological deliberations concerning the collection of data on public-sector employment and its comparability with...

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