What would be the counterfactual wage of civil servants if they were employed in the private sector? Using the French European Household panel, we present a new approach to the wage differential between the public and the private sectors. We estimate a model, which controls both for selection into employment, and for selfselection into the public sector. We also introduce unobserved heterogeneity in the propensity to be employed in either job sector, and in the sector-specific productivity. Evidence based on the counterfactual distributions suggests a large public-private wage premium for low public wages. This conclusion also holds for women but may be explained by a weaker discrimination in the public sector. Unlike women, most male civil servants would earn more in the private sector.
Beffy et al. (Wed,) studied this question.