Earnings Differential between Public and Private Sectors in Pakistan

Zafar Mueen Nasir


The paper explores the earnings differential between public
and private sectors in Pakistan. The private sector is further divided
into formal and informal sectors for comparison purposes. It utilises an
expanded version of the human capital model to determine important
determinants of earnings in each sector. Using standard technique, the
earnings are decomposed into two parts, i.e., differential due to
personal characteristics and due to earnings structure of the particular
sector. The Labour Force Survey 1996-97 is used for the analysis of wage
differential. Results indicate that workers in public sector earn more
than both private formal as well as informal sector workers. These
earnings are higher due to their superior personal human capital
endowment; however, the wage structure of the public sector is not
helping them. The informal sector workers are earning lower than both
public sector and private formal sector workers due to both personal
characteristics and wage structure of the informal sector.

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DOI: https://doi.org/10.30541/v39i2pp.111-130


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