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European Economic Review 37 (1993) 97-l 14. North-Holland Public and private sector wages in the Netherlands* Joop Hartog and Hessel Oosterbeek University of Amsterdam, Amsterdam, Netherlands Received September 1990, final version received November 1991 There is much debate in the Netherlands about underpayment of public sector workers relative to private sector workers. In this paper we analyze the wage structures in both sectors, using an endogenous switching regression model. Unlike previous Dutch studies, we find that the earnings prospects of public sector workers are better in the public sector than in the private sector. For private sector workers we find the exact opposite; their earnings prospects are better in the private sector. Moreover the allocation over sectors points to comparative advantages. 1. Introduction Recently there has been lot of discussion in the Netherlands about the wages of public sector workers relative to the wages of their private sector equivalents. Until 1982 these wages were linked: The index of growth of private sector wages was directly applied to public sector wages. In 1982, however, this so-called ‘linking’ was abandoned, and since then public sector wages have fallen behind. Several studies reveal that, particularly at higher job levels, public sector workers are underpaid in the Netherlands. Using a 1982 sample, Schippers (1986) estimates with OLS separate