Public-Sector Compensation over the Life Cycle

Pedro Gomes and Felix Wellschmied

No 13042, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The size of the public sector in terms of employment and compensation has a strong life-cycle dimension. We establish a quantitative partial-equilibrium life-cycle model with incomplete markets, private and public sectors, and risk-averse workers, and use it to (i) calculate three dimensions of public-sector compensation: wage, pension, and job-security premia, and (ii) quantify the effects of harmonizing the compensation in the two sectors. We find that the job-security and pension's premia are important forms of compensation to public-sector workers. Harmonizing the characteristics of public employment with those of the private sector would lower the unemployment rate and reduce government costs.

Keywords: public-sector employment; public-sector wages; life cycle; unemployment; retirement; pensions; job security (search for similar items in EconPapers)
JEL-codes: E24 H30 H55 J45 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2020-03
New Economics Papers: this item is included in nep-age, nep-lma and nep-mac
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Citations: View citations in EconPapers (7)

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