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Wage differentials and state-private sector employment choice in the Federal Republic of Yugoslavia, Volume 1
Author:Lokshin, Michael M.; Jovanovic, Branko; Country:Serbia;
Date Stored:2003/03/01Document Date:2003/01/31
Document Type:Policy Research Working PaperSubTopics:Economic Theory & Research; National Governance; Banks & Banking Reform; Health Monitoring & Evaluation; Public Health Promotion; Decentralization; Agricultural Knowledge and Information Systems
Language:EnglishMajor Sector:(Historic)Sector not applicable
Region:Europe and Central AsiaReport Number:WPS2959
Sub Sectors:(Historic)Sector not applicableCollection Title:Policy, Research working paper series ; no. WPS 2959
Volume No:1  

Summary: The authors use the newly available Yugoslavian Labor Force Survey data to investigate wage differentials and employment decisions in the state and private sectors in Yugoslavia. For the analysis the authors use three empirical models that rely on different statistical assumptions. They extend the standard switching regression model to allow non-normality in the joint distribution of the error terms. After correcting for the sector selection bias and controlling for workers' characteristics the authors find a private sector wage advantage. The wage premium is largest for workers with low education levels and declining for workers with higher educational levels. Given the regulatory and tax policies that pushed the private sector into the informal sphere of the economy during the period covered by our data, the authors argue that the state-private wage gap is likely to grow in the future. This will make it increasingly difficult for the state sector to attract and retain highly skilled employees.

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