Public sector pay gap in France : new evidence using panel data

We estimate the public wage gap in France for the period 1990-2002, both at the mean andat different quantiles of the wage distribution, for men and women separately. We account forunobserved heterogeneity by using fixed effects estimations on panel data and, departingfrom usual practice, allow the public wage markup to vary over time. We also provide one ofthe very first applications of fixed effects quantile regressions. Contrary to common belief,results convey that monetary returns are not fundamentally different in the public sector.Firstly, public wage ‘premia’ (for women) or ‘penalties’ (for men) are essentially the result ofselection. After controlling for unobserved heterogeneity, only small pay differences betweensectors remain over time, reflecting fluctuations due to specific public policies and to the procyclicalityof private sector wages. The long-term difference is essentially zero. Secondly, therelative compression of the wage distribution by the public sector is also partly due tounobserved characteristics. The most natural explanation for these results is that the civilsector manages to attract better workers in the lower part of the distribution, in part becauseof non-monetary gains (including job protection), but fails to retain the most productive onesat the top.