Marcelo Rodrigues dos Santos, INSPER

Sala 108

“Public Sector Employment, Household Savings and Labor Supply”

Abstract: In many countries the structure of wages and the labor law legislation are completely different for public and private employees. In this paper, we develop a general equilibrium overlapping generations model to quantify the effect of such differences on household savings and labor supply. To conduct our analysis, we first use microdata from two Brazilian household surveys to document that civil servants save and work significantly less than their counterpart in the private sector. Then, we estimate the model to be consistent with micro and macro evidence for Brazil. Our counterfactual exercises show that aligning the structure of wages and the labor law legislation in the public sector with the ones in the private sector can produce sizeable increases on aggregate savings, employment, output and welfare, without reducing the provision of public goods and services.