DP3787 A New Method for Estimating Public Sector Pay Premia: Evidence from Britain in the 1990's

Author(s): Richard F Disney, Amanda Gosling
Publication Date: February 2003
Keyword(s): measurement error, pay determination, selection effects
JEL(s): J31
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3787

This Paper looks at public sector pay in Britain. We present a novel instrument that exploits the variation in public sector status across individuals arising from the privatisation programme of the 1990s. We show formally that results that are estimated may thereby be robust to self-selection and measurement error, both of which are important and which bias cross-sectional estimates. Our results suggest that women in the public sector earn more then they could elsewhere, whilst, on average, men do not.