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Public-sector employment, wages and education decisions

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  • Chassamboulli, Andri
  • Gomes, Pedro

Abstract

We set up a search and matching model with a private and a public sector to understand the effects of employment and wage policies in the public sector on unemployment and education decisions. The effects on the educational composition of the labor force depend crucially on the structure of the labor market. An increase of skilled public-sector wages has a small positive impact on educational composition and larger negative impact on the private employment of skilled workers, if the two sectors are segmented. If there are movements across the two sectors, it has large positive impacts on education and on skilled private employment. We highlight the usefulness of the model for policymakers by calculating the value of public-sector job security for skilled and unskilled workers.

Suggested Citation

  • Chassamboulli, Andri & Gomes, Pedro, 2023. "Public-sector employment, wages and education decisions," Labour Economics, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:labeco:v:82:y:2023:i:c:s0927537123000209
    DOI: 10.1016/j.labeco.2023.102345
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    More about this item

    Keywords

    Public-sector employment; Public-sector wages; Unemployment; Skilled workers; Education decision; Public-sector job security premium;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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