Does Public Sector Employment Buffer the Minimum Wage Effects?

Lucas Navarro and Mauricio Tejada

Review of Economic Dynamics, 2022, vol. 43, 168-196

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)

Keywords: Search frictions; Public sector employment; Minimum wage (search for similar items in EconPapers)
JEL-codes: C51 J45 J64 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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DOI: 10.1016/j.red.2021.02.004

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