Unveiling the Public Sector Wage Premium in Kosovo: Insights from a Re-Weighted Decomposition Approach

This study examines the pay gap between the public and private sectors in Kosovo. We apply a re-weighting technique to decompose wage differentials into pure treatment and pure endowment components. At the mean, we find an unexplained public-sector premium of 31% in hourly wages. When wages are measured monthly, the treatment effect is roughly halved, reflecting substantially longer working hours in the private sector. Unconditional quantile regression shows an inverted U-shaped public-sector premium, with significant treatment effects in the middle of the distribution. Subgroup estimation shows broadly similar patterns across most groups. However, for women, we find no statistically significant treatment effect.