Evaluating the public-private wage differential in Chile

Abstract

This paper estimates and analyzes the wage gap between the public and private sector employees in Chile for the years 2000 and 2009. We first concentrate on conditional mean estimation and on a control function method. Then, the Machado and Mata (2005) decomposition method is used to discriminate the differences in earnings distribution between both sectors in each year. In general our results tend to suggest an heterogeneous gap along the wage distribution and by group of educational attainment. They also tend to indicate an alignment of the public sector with the market in the sense of reducing the wage premium for the low skilled worker and increasing the wage to those with higher qualifications.