Private-public wage gap and return to experience: Role of geography, gender and education

Analyses of the static private-public wage premium are available for most industrialized countries and the higher education level in the public sector has been shown to be important. We address three shortcomings in these studies – the return to work experience accumulated in the two sectors, the role of geography, and gender differences. Rich register data for Norway allow for observation of work experience by sector and region, and the dynamic gap resulting from different returns to sector experience can be calculated. When selection on observable and unobservable worker characteristics is controlled for, the estimates show that experience accumulated in the private sector has higher return than public sector experience. Geography matters, and both the static gap and the dynamic experience effect are higher in cities. For the low educated, the additional return to private experience is a city phenomenon only. Gender differences are important for high-educated workers. High-educated women have less additional return to private sector experience than high-educated men and receive the same gain from experience accumulated in cities and in the rest of the country. The dynamic experience effect adds to the static private wage premium, and for high-educated male workers it accounts for about 2/3 of the total wage gap including 10 years of experience. •Higher return to experience accumulated in private sector compared to public.•Both static and dynamic private-public wage gaps are higher in cities.•Low-educated receive additional gain from private sector experience only in cities.•Dynamic experience effect accounts for 2/3 of total gap for high-educated males.•High-educated women less additional return to private experience than men.