Gap between Public and Private Wages and Wages Determination in the Public Sector

ABSTRACT This study verifies, first of all, the existence of segmentation between the public and private labour markets in Brazil by means of the analysis of the behaviour of employment and wages in those markets during the 1990’s, showing that the con- trolled wage gap between the workers of both sectors have increased in a manner favourable to civil servants in this period. Later on, the study analyses the factors that specifically influence the wage setting in the public sector, which would account for the existence of such gap, by means of a theoretical discussion followed by the application of econometric tests.