(Why) Is There a Public/Private Pay Gap?

33 Pages Posted: 2 Aug 2018 Last revised: 20 Jan 2020

See all articles by Christos Makridis

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: May 23, 2019


The government is facing a severe shortage of skilled workers. The conventional wisdom in branches of policy and public administration is that the shortage is driven by low salaries that are not competitive for attracting top talent. Using longitudinal data on high skilled workers between 1993 and 2013, this paper shows that, if anything, government employees earn more than their private sector counterparts. Although government workers tend to earn less in the raw data, these differences are driven by the correlation between unobserved productivity and selection into private sector jobs. Instead, this paper provides empirical evidence that low non-pecuniary amenities, such as development opportunities and management, can explain earnings differences between the public and private sectors.

Keywords: careers, development and training, earnings, management, public-private pay gap

JEL Classification: H11, J31, J32, J38, M54

Suggested Citation

Makridis, Christos, (Why) Is There a Public/Private Pay Gap? (May 23, 2019). Available at SSRN: https://ssrn.com/abstract=3213757 or http://dx.doi.org/10.2139/ssrn.3213757

Christos Makridis (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Cambridge, MA 02142
United States

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