The Greek Public Sector Wage Premium before the Crisis: Size, Selection and Relative Valuation of Characteristics

What is it about?

As the Greek crisis led to a significant wave of public-sector pay cuts and downsizing, this paper looked at the structure of earnings in the Greek public sector prior to the crisis, vis-a-vis the private sector, to shed light on the main areas where public sector pay may have been unfair, irrational (from an economic efficiency point of view) or distortionary. We applied so-called decomposition techniques to see which worker characteristics are over-/under-compensated in the two sectors (public-private) and then discussed how the policy measures (public sector pay-cuts) may be influencing these differences.

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