A Reexamination of the Federal-Private Wage Differential in the United States

The federal-private wage differential is reexamined with recent data. Using specifications similar to those used in three previous studies, I find that the federal-private wage differential has narrowed since the 1974-79 period analyzed in those studies. In addition, I discover that wage differentials based on specifications used in the literature are biased upward because the previous studies did not control for detailed occupational and locational characteristics of workers. Corrected point estimates of the wage gap are much smaller than previous estimates in the literature. Differences in the gap across demographic groups, occupations, and locations are also discussed.