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Public employment redux

Author

Listed:
  • Garibaldi, Pietro
  • Gomes, Pedro
  • Sopraseuth, Thepthida

Abstract

The public sector hires disproportionately more educated workers. To rationalize this finding, we propose a model with a perfectly competitive private sector, and non-Walrasian public sector. Our economy also features heterogeneity across individuals and jobs, and a simple sorting mechanism that generates underemployment - educated workers performing unskilled jobs. We find that the public-sector wage differential and excess underemployment account for 15 percent of the education bias, with the remaining accounted for by technology. In a counterintuitive fashion, we find that more compressed wages in the public sector raise inequality in the private sector.

Suggested Citation

  • Garibaldi, Pietro & Gomes, Pedro & Sopraseuth, Thepthida, 2021. "Public employment redux," Journal of Government and Economics, Elsevier, vol. 1(C).
    • Handle: RePEc:eee:jogoec:v:1:y:2021:i:c:s2667319321000033
    DOI: 10.1016/j.jge.2021.100003
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    Citations

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    Cited by:

    1. Garibaldi, Pietro & Gomes, Pedro & Sopraseuth, Thepthida, 2025. "Output costs of education and skill mismatch in OECD countries," Economics Letters, Elsevier, vol. 250(C).
    2. Alba Couceiro de León & Juan J. Dolado, 2023. "Revisiting the public–private wage gap in Spain: new evidence and interpretation," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 14(3), pages 353-377, December.
    3. Matthew Nibloe, 2025. "Levelling down: the distributional consequences of public pay caps," IFS Working Papers W25/27, Institute for Fiscal Studies.
    4. Naeem Akram, 2022. "Public-Private Wage Differentials: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 27(2), pages 39-64, July-Dec.
    5. Diogo Baerlocher, 2022. "Public employment and economic growth," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 211-236, February.
    6. Bettoni, Luis G. & Santos, Marcelo R., 2022. "Public sector employment and aggregate fluctuations," Journal of Macroeconomics, Elsevier, vol. 72(C).
    7. Vincenzo Caponi & Simone Nobili, 2024. "The effects of public sector employment on the economy," IZA World of Labor, Institute of Labor Economics (IZA), pages 3322-3322, June.
    8. Andrea Camilli & Pedro Gomes, 2023. "Public employment and homeownership dynamics," Public Choice, Springer, vol. 194(1), pages 101-155, January.
    9. Jackson, Paul, 2023. "Equilibrium underemployment," Labour Economics, Elsevier, vol. 81(C).
    10. Chassamboulli, Andri & Gomes, Pedro, 2023. "Public-sector employment, wages and education decisions," Labour Economics, Elsevier, vol. 82(C).
    11. Geromichalos, Athanasios & Kospentaris, Ioannis, 2022. "The unintended consequences of meritocratic government hiring," European Economic Review, Elsevier, vol. 144(C).

    More about this item

    Keywords

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    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
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; 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

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