Evaluating the Public Pay Gap: A Comparison of Public and Private Sector Wages in France

This paper resolves the empirical puzzle in the public-private wage literature: why studies using similar data reach contradictory conclusions about wage premiums and penalties. Utilizing rich French administrative panel data (2012-2019), this study has two main contributions: first, it presents a set of new, intuitive yet previously undocumented stylized facts about wage dynamics, sectoral mobility, and gender differences across sectors. The results reveal that the modest hourly wage gaps conceal substantial disparities in lifetime earnings and employment stability. Women, in particular, gain a significant lifetime earnings advantage in the public sector, driven by higher retention, better-compensated part-time work, and more equitable annual hours compared to the private sector, where gender gaps remain larger, especially for those with higher education. In contrast, highly educated men experience a lifetime penalty in public employment due to rigid wage structures. By flexibly modeling sectoral transitions, transitions into and out of employment, and earnings heterogeneity using an Expectation-Maximization algorithm, this study shows that both premiums and penalties depend systematically on gender, education, and labor market experience. The analysis reveals that significant unobserved heterogeneity remains in wage dynamics. These findings unify prevailing narratives by providing a comprehensive, descriptive account of sectoral differences in transitions, part-time work and wages by gender.