The State and Local Pay Penalty: The Effect of Skill and College Major

59 Pages Posted: 31 Oct 2013 Last revised: 10 Dec 2015

Date Written: October 29, 2013

Abstract

This paper reassesses the public sector pay gap using AFQT score and college major as measures of skill. Among the college educated, there is strong evidence that those with lower skills enter the public sector. In contrast to the private sector, for college-educated public sector workers AFQT score is not correlated with pay, and college major is only weakly predictive of pay. Furthermore, simple controls for college major explain most of the public-private sector pay gap. I conclude that public sector pay gap is much smaller than previously estimated and pay rigidities cause significant skill-based selection between the sectors.

Keywords: Public sector economics, wage differentials

JEL Classification: H30, H72, H73

Suggested Citation

Schanzenbach, Max Matthew, The State and Local Pay Penalty: The Effect of Skill and College Major (October 29, 2013). Northwestern Law & Econ Research Paper No. 13-36. Available at SSRN: https://ssrn.com/abstract=2347022 or http://dx.doi.org/10.2139/ssrn.2347022

Max Matthew Schanzenbach (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

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