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© 1989 International Bank for Reconstruction and Development / The World Bank

research-article

Wage Differentials and Moonlighting by Civil Servants: Evidence from Côte d'Ivoire and Peru

Jacques van der Gaag, Morton Stelcner, and Wim Vijverberg

Jacques van der Gaag is chief of the Welfare and Human Resources Division (PHRWH), Population and Human Resources Department, the World Bank. Morton Stelcner is a consultant to PHRWH and an associate professor of economics at Concordia University, Montreal, Quebec. Wim Vijverberg is an assistant professor of economics at the University of Texas at Dallas and a consultant to the World Bank. The data used are derived from the Côte d'lvoire Living Standards Survey (CILSS) and Peru Living Standards Survey (PLSS). The CILSS was conducted jointly by the World Bank and the Direction de la Statistique of the Ministère de I'Economie et des Finances of Côote d'Ivoire. The PLSS was sponsored by the World Bank, the Instituto Nationale de Estadistica, and the Central Bank of Peru. The authors thank the staff of PHRWH for suggestions and comments and Dennis de Tray for discussions which improved the article's presentation.

As part of their efforts to reduce fiscal deficits, many governments have allowed public sector salaries to erode, often on the assumption that government workers are overpaid vis-à-vis those in the private sector. We test that assumption by analyzing public-private pay differentials in Côte d'Ivoire and Peru. Switching regressions models are estimated using full information maximum likelihood (FIML), and the results are compared to those obtained using ordinary least squares (OLS) techniques. The OLS yields seriously biased estimates of the pay structure, suggesting that public wages are higher than private wages; the FIML estimates show the opposite. Our probit analysis also shows that the wage disadvantage of civil servants is a determinant of the greater prevalence of moonlighting among public than private employees. The evidence suggests that reductions in employment rather than pay, while being less palatable in the short term, will be more effective in the long run.


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