Public-Private Sector Wage Comparisons and Moonlighting in Developing Countries: Evidence from Cote d'Ivoire and Peru

摘要

The study analyzes public-private sector pay differentials in two developing countries, Cote d'Ivoire and Peru, using unusually comprehensive micro data sets - the 1985 Cote d'Ivoire Living Standards Survey (CILSS) and the 1985/86 Peru Living Standards Survey (PLSS). Explicit attention is given to the endogeneity of sector choice. The authors estimate switching regressions models using Full Information Maximum Likelihood (FIML) and compare the results to those obtained using Ordinary Least Squares (OLS). For both countries, there are striking differences between the OLS and FIML estimates. The OLS results suggest that public sector wages are higher than private sector wages, but the FIML estimates show that public sector wage offers are well below those in the private sector. Thus, an important methodological conclusion of the study is that standard OLS regressions on samples of public and private sector employees are likely to yield seriously biased estimates of pay structures, and hence a wrong assessment of the wage gap. The authors further explore the main finding that public sector wages are 'too low' by considering the commonly observed phenomenon of 'moonlighting' (double jobbing). After finding that moonlighting is more prevalent among government workers than among those in the private sector, whether the FIML estimates of the public-private wage gap can help explain why government workers are likely to have second jobs is considered. (Copyright (c) 1989 The International Bank for Reconstruction and Redevelopment/The World Bank.)