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Working hours, income volatility and public sector employment as insurance

Author

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  • Al Yussef, Achtee
  • Hens, Luc
  • Van Belle, Eva

Abstract

Poorer economies tend to have higher working hours per adult due to the income effect. However, when controlling for resource abundance and public sector employment, the income effect weakens. We present a simple model to explain this phenomenon: in resource-rich economies where income is volatile and public and private social insurance are absent, individuals prefer more secure public sector jobs, even if they offer lower wages than the private sector. In equilibrium, the wage gap is equal to the insurance premium, and individuals work longer hours to compensate for the loss in income. Recent data on working hours support this hypothesis: a higher share of public sector employment in resource-rich economies is associated with longer working hours along both the extensive and intensive margins.

Suggested Citation

  • Al Yussef, Achtee & Hens, Luc & Van Belle, Eva, 2025. "Working hours, income volatility and public sector employment as insurance," Labour Economics, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:labeco:v:93:y:2025:i:c:s0927537125000168
    DOI: 10.1016/j.labeco.2025.102689
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    More about this item

    Keywords

    Natural resources; Resource curse; Labor supply; Public employment;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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