Employment Choices and Wage Differentials: Evidence on Labor Force Data Sets from Pakistan

Labor market theories confirm the existence of wage differentials in various sectors. This study investigates the employment choices and wage differentials in established econometric models on the large cross-sectional labor market survey data sets from Pakistan. The results across wage distribution suggest that the wage gap does exist in public–private wage differentials, and it varies across levels of education, occupation and regions. The study concludes that an individual with a high level of education is more likely to choose the public sector. The wage gap between public–private sectors becomes narrow at the high end of the distribution but is still significant. The wage differential varies across levels of education, occupations and regions. Higher levels of education and low-skilled occupations are relatively better paid in both sectors, while lower levels of education have much better opportunities in the public sector. The results highlight the various employment choices and characteristics for policy makers in addressing wage differentials.