Working hours, income volatility and public sector employment as insurance

Achtee Al Yussef, Luc Hens and Eva Van Belle

Labour Economics, 2025, vol. 93, issue C

Abstract: Poorer economies tend to have higher working hours per adult due to the income effect. However, when controlling for resource abundance and public sector employment, the income effect weakens. We present a simple model to explain this phenomenon: in resource-rich economies where income is volatile and public and private social insurance are absent, individuals prefer more secure public sector jobs, even if they offer lower wages than the private sector. In equilibrium, the wage gap is equal to the insurance premium, and individuals work longer hours to compensate for the loss in income. Recent data on working hours support this hypothesis: a higher share of public sector employment in resource-rich economies is associated with longer working hours along both the extensive and intensive margins.

Keywords: Natural resources; Resource curse; Labor supply; Public employment (search for similar items in EconPapers)
JEL-codes: D31 D72 J22 J45 O13 O17 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:93:y:2025:i:c:s0927537125000168

DOI: 10.1016/j.labeco.2025.102689

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