TY  - RPRT
        AU  - Garibaldi, Pietro
AU  - Gomes, Pedro Maia
AU  - Sopraseuth, Thepthida
        TI  - Public Employment Redux
        PY  - 2019/Dec/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 12871
        UR  - https://www.iza.org/publications/dp12871
        AB  - The public sector hires disproportionately more educated workers. Using US microdata, we show that the education bias also holds within industries and in two thirds of 3-digit occupations. To rationalize this finding, we propose a model of private and public employment based on two features. First, alongside a perfectly competitive private sector, a cost-minimizing government acts with a wage schedule that does not equate supply and demand. Second, our economy features heterogeneity across individuals and jobs, and a simple sorting mechanism that generates underemployment - educated workers performing unskilled jobs.
The equilibrium model is parsimonious and is calibrated to match key moments of the US public and private sectors. 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 wage compression in the public sector raises inequality in the private sector. A 1 percent increase in unskilled public wages raises skilled private wages by 0.07 percent and lowers unskilled private wages by 0.06 percent.
        KW  - public-sector employment
KW  - public-sector wages
KW  - underemployment
KW  - education
        ER  -