The public sector wage premium puzzle
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This paper investigates the public sector wage premium in the UK over the first decade of the 21 st century using both econometric and economic modelling methods. A com- prehensive literature review is conducted to summarise the four popular types of meth- ods adopted by the traditional microeconometric studies. Application of these methods results in an estimated public sector wage premium equal to 6.5% . Indirect inference is then introduced as a new method of testing and estimating a microfounded economic model. All four types of econometric methods can be used as auxiliary models to sum- marise the data features, based on which the distance between the actual data and the model -simulated data is assessed. The selection bias can also be tested in a straightfor- ward way under indirect inference.
International Journal of Computational Economics and Econometrics;
Article accepted for publication in International Journal of Computational Economics and Econometrics
Cardiff Metropolitan University (Grant ID: Cardiff Metropolian (Internal))