Policy Report on the Race for Public Sector Employment in Kosovo and Albania: What lies behind it?

This Policy Report investigates public-private wage differentials in Kosovo and Albania using data from Kosovo Household Budget Survey 2011 and Albanian Living Standard Measurement Survey 2012. The Oaxaca-Blinder Decomposition technique is employed to determine whether the wage gap is attributable to differences in employees’ characteristics or to differences in remuneration endowments. The empirical methodology follows a three-stage approach in order to address the double sample selection problem arising from non-random selection of labour market participants and employment into public/private sector. Separate wage regressions are estimated for men and women in each country, including selection-correction terms. In order to complement findings along the entire distribution of wages, decomposition technique of quantile and distribution regression-based estimators is utilized. In general, the results suggest that higher wages in the public sector are explained by better characteristics of public employees in both countries, while there is evidence of significant differences in returns only for the lower wage quantiles. To access the Policy Report, please click here.