Graduate Research and Discovery Symposium (GRADS)


Measuring the federal wage premium: a nonparametric approach


Eric Makela


Tom Mroz

Document Type




Publication Date

Spring 2013


Recently, the earnings of federal workers have come under renewed scrutiny. Previous research has found evidence of wage premiums for U.S. federal workers ranging anywhere from 0.03% to 18.2%. These estimates however are based on highly restrictive assumptions, and are likely to perform poorly in accounting for differences in age, education, and occupation between the private and federal workforces. This paper utilizes recently-developed econometric techniques which are far less restrictive in order to estimate counterfactual wage distributions. These counterfactuals estimate the earnings of federal workers if they were compensated equal to similar workers in the private sector; likewise, I estimate the earnings that private sector workers would receive if they were compensated as are their federal counterparts. This new method of estimating federal wage premiums finds that the federal differentials are reduced by 4/5 to 4.2% of earnings for men and by over 1/2 to 15.0% for women.

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