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School of Economics and Finance Seminar The Interaction of Public and Private Sector in Least Developed Countries

Speaker: Dr Ija Trapeznikova, Royal Holloway, University of London

Abstract: Public sector in least developed countries comprises a large share of wage employment, pays higher wages, and provides greater job stability than the private sector. These differences can reflect institutional features of the public sector, productivity shortcomings in the private sector, heterogeneity in the selection of workers, or a combination of these factors. Most importantly, if the public sector has the power to attract the most talented workers in the economy, it might deprive the private sector of a key driver of growth. The aim of this paper is to investigate the determinants and the effects of public sector employment characteristics in terms of job creation, productivity, workers' composition, and wages in the economy. We do so in two steps. First, we produce a detailed empirical description of labour market outcomes in poor economies, focusing on the difference between the private and public sectors, based on individual-level data for a number of Sub-Saharan African countries. Second, we develop and estimate a frictional labour market model to quantify the effect of the public sector wage premia on wage employment and productivity growth.

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