Public sector wage premium trends in Italy: 1995-2010

This paper analyses the evolution of the public sector wage premium in Italy in the 1995-2010 period. OLS and quantile regressions are used to decompose time variations of the premium into characteristics and rewards à la Oaxaca. We show, first, that the well-documented rise of raw public-private wage differentials in the last decade was the result of increased gaps only at top deciles. Second, that, contrary to common beliefs, public versus private net premia did not fundamentally change over time, so that rising public-private raw differentials were due for the most part to changes in the mix of characteristics (especially occupations) across sectors and time. Third, that the long-term net premium is essentially zero at top percentiles and for males - with small fluctuations over time reflecting specific public policies and cycle features -, and decreasing at bottom and middle deciles. This implies a lower dispersion of public wages over time and a less compressed public wage structure.