This paper estimates the average Australian public sector wage premium. It
includes a detailed critical review of the methods available to address this
issue. The chosen approach is a quasi‐differenced panel data model,
estimated by the Generalised Method of Moments, which has many
advantages over other methods and has not been used before for this topic. I
find a positive average public sector wage premium for both sexes. The best
estimates are 6.7% for men and 10.5% for women. The estimate is statistically
significant for men (p = 0.024) and for women (p < 0.001). No evidence is
found to suggest that the public sector has an equalising effect on the wages
of its workers.