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Does Public Sector Employment Buffer the Minimum Wage Effects?

Author

Listed:
  • Lucas Navarro

    (Universidad Alberto Hurtado)

  • Mauricio Tejada

    (Universidad Alberto Hurtado)

Abstract

This paper studies the impact of a minimum wage policy in a labor market with a private and a public sector. We develop a two-sector search and matching model with minimum wage and heterogeneous workers in their human capital. We structurally estimate the model using data for Chile, a country with a large fraction of employment in the public sector and a binding minimum wage. Counterfactual analysis shows that institutional features of public sector employment reduce labor market frictions and mitigate the negative effect of the minimum wage on unemployment and welfare. (Copyright: Elsevier)

Suggested Citation

  • Lucas Navarro & Mauricio Tejada, 2022. "Does Public Sector Employment Buffer the Minimum Wage Effects?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 43, pages 168-196, January.
  • Handle: RePEc:red:issued:20-43
    DOI: 10.1016/j.red.2021.02.004
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    More about this item

    Keywords

    Search frictions; Public sector employment; Minimum wage;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • 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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