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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 4 Public-sector wage premium in Poland after a quarter of a century of economic transition

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The discussion presented in the previous chapters clearly demonstrates that there are both theoretical and empirical grounds for expecting significant differences in wages between the private sector and the public sector in Poland. Moreover, the specific structure of the Polish economy and its evolution during the economic transition process allow us to expect significant differences in the scale and structure of the public-private wage gap, as compared to highly developed economies on which most previous studies were conducted.

The purport of the present chapter is to discuss the size and structure of the public-sector wage premium in Poland a quarter of a century after the onset of the economic transition. The first part of the chapter presents a review of the first-wave of empirical studies published up to 2007. The strand of literature referring to the 1990s typically uses data from labour force survey (LFS) and adopts the traditional single-equation methodological approach. Subsequently, we move onto the current period, over 25 years after the onset of economic transition, and discuss the discoveries of the latest studies. We begin with a presentation of the data on relative wages in the public sector in Poland, focusing on the structural differences and its evolution over time. The studies examined in this chapter refer to the size and structure of the premium in terms of demographic and educational characteristics among workers and the issue of spatial differences. The chapter concludes with a discussion of a selection of the current issues...

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