Why go public? A study of the individual determinants of public sector employment choice

This paper investigates why workers choose the public versus the private sector to understand which aspects of public sector labour contracts should be improved to attract more high-skilled individuals. Using data from the 2014 wave of the Survey of Household Income and Wealth (SHIW), the paper finds that the public sector is generally chosen for its non-pecuniary aspects, and that for highly educated workers it presents a greater disadvantage in terms of salaries, career prospects and transparency of selection procedures, and a greater advantage in terms of work-life balance and job content, both in terms of social utility and closer relation to the field of study. For high-ability individuals, moreover, the public sector disadvantage deepens for career prospects while the advantage in terms of holding employment closer to the field of study increases. Estimates on actual sorting provide evidence that high-ability individuals are more likely to start a job in the private sector when the wage distribution in the public sector is more skewed, i.e. when the career prospects are less dynamic.