Evolution of the public-private sector wage differential during transition in Estonia

This article estimates the public-private sector wage differential in Estonia over the transition period. Quantile regression is used with a dataset from Estonian Labour Force Surveys from 1989 to 2004 for this purpose. The results of the analysis indicate that the public-private sector wage differential was negative during early transition but has decreased subsequently. It also shows that employees with low potential wages tend to gain more or lose less from working in the public sector than workers with high potential wages. The public-private sector wage differential is negatively related to the number of public employees and tends to be counter-cyclical. Political cycles have no effect on the public-private sector wage differential in Estonia.