Public-Private Sector Wage Differentials in Germany: Evidence from Quantile Regression

This paper measures and decomposes the differences in earnings distributions between public sector and private sector employees in Germany for the years 1984-2000. Two decomposition methods are used: Oaxaca decomposition using quantile regression and the decomposition proposed by Machado and Mata (2002). Both indicate that the public sector wage premium is highest at the lower end of the wage distribution and then decreases monotonically as we move up the wage distribution. At the mean or the median, wages are lower in the public sector for men but higher for women. Separate analyses by work experience and educational groups reveal that the most experienced employees and those with basic schooling do best in the public sector. All these results are stable over the 80s and 90s.