Public Sector Wage Policy and Labor Market Equilibrium: A Structural Model

Bradley, Jake; Postel-Vinay, Fabien; Turon, Helene

Abstract

We develop and estimate a structural model that incorporates a sizable public sector in a labor market with search frictions. The wage distribution and the employment rate in the public sector are taken as exogenous policy parameters. Overall wage distribution and employment rate are determined within the model, taking into account the private sector’s endogenous response to public sector employment policies. Job turnover is sector specific and transitions between sectors depend on the worker’s decision to accept alternative employment in the same or different sector by comparing the value of employment in the current and prospective jobs. The model is estimated on British data by a method of moments. We use the model to simulate the impact of various counterfactual public sector wage and employment policies.

Citation

Bradley, J., Postel-Vinay, F., & Turon, H. (2017). Public Sector Wage Policy and Labor Market Equilibrium: A Structural Model. Journal of the European Economic Association, 15(6), 1214-1257. https://doi.org/10.1093/jeea/jvw026

• Journal Article Type: Article
• Acceptance Date: Jul 18, 2016
• Online Publication Date: Feb 14, 2017
• Publication Date: Dec 1, 2017
• Deposit Date: Sep 29, 2017
• Publicly Available Date: Feb 15, 2019
• Journal: Journal of the European Economic Association
• Print ISSN: 1542-4766
• Electronic ISSN: 1542-4774
• Publisher: Oxford University Press
• Peer Reviewed: Peer Reviewed
• Volume: 15
• Issue: 6
• Pages: 1214-1257
• DOI: https://doi.org/10.1093/jeea/jvw026
• Public URL: https://nottingham-repository.worktribe.com/output/964105
• Publisher URL: https://academic.oup.com/jeea/article-abstract/doi/10.1093/jeea/jvw026/2995882/Public-Sector-Wage-Policy-and-Labor-Market?redirectedFrom=fulltext
• Additional Information: This is a pre-copyedited, author-produced version of an article accepted for publication in Journal of the European Economic Association following peer review. The version of record Jake Bradley, Fabien Postel-Vinay, Hélène Turon; Public Sector Wage Policy and Labor Market Equilibrium: A Structural Model, Journal of the European Economic Association, jvw026 is available online at: https://academic.oup.com/jeea/article-abstract/doi/10.1093/jeea/jvw026/2995882/Public-Sector-Wage-Policy-and-Labor-Market?redirectedFrom=fulltext.
• Contract Date: Sep 29, 2017