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Although many papers investigate the differences in wages between the public and private sector in Europe, only few of them investigate the situation in Russia. Most of the literature focuses on cross- sectional differences using quantile or switching regressions, while in my thesis I also control for unobserved individual heterogeneity and job mobility between sectors. In my thesis I estimate the public-private gap in Russia using RLMS data for the eight consequent waves. In contrast to Europe, the gap is found to be negative and can be estimated at about 20% for men aged between 20 and 60 years. It is persistent over time and neither of the observed characteristics such as level of education or experience can explain it. However, the possible explanation might lie in higher job satisfaction rate and better working conditions together with higher income persistence and lower job loss rates in the public sector. Moreover, after control for the unobserved effects, the gap increases with experience and is the largest for the low-educated group of workers, and the men with ’high’ level of education are found to be the most penalized group. Last finding is that the earnings in the public sector in Russia are less compressed than in the private sector contrary to the findings for the European countries.

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