In this paper the public-private wage gap is estimated by means both of the OLS and the quantile regression, which will provide a more complex picture of the distribution of the public-private sector wage gap. The author finds the existence of significant public-private wage gap (about 30%) considering both observable and unobservable characteristics of workers and jobs. Using the decomposition based on quantile regression helps to answer the question about the nature of the wage differences. The author comes to the conclusion that the main reason for the gap is the institutional mechanisms of public sector wages in Russia. The analysis is based on the data from Russian Longitudinal Monitoring Survey (RLMS-HSE) 2000-2010.
Institutions affect investment decisions, including investments in human capital. Hence institutions are relevant for the allocation of talent. Good market-supporting institutions attract talent to productive value-creating activities, whereas poor ones raise the appeal of rent-seeking. We propose a theoretical model that predicts that more talented individuals are particularly sensitive in their career choices to the quality of institutions, and test these predictions on a sample of around 95 countries of the world. We find a strong positive association between the quality of institutions and graduation of college and university students in science, and an even stronger negative correlation with graduation in law. Our findings are robust to various specifications of empirical models, including smaller samples of former colonies and transition countries. The quality of human capital makes the distinction between educational choices under strong and weak institutions particularly sharp. We show that the allocation of talent is an important link between institutions and growth.