Association for Public Policy Analysis & Management

Job sector choices are a matter of interest in public sector management, both in policymaking related to the attraction of suitable individuals and in research related to the intrinsic and extrinsic determinants of these choices. The modern consensus in public administration in this matter is that intrinsic factors related to altruism, conceptualized as Public Service Motivation by Perry and Wise (1990), are predominant in choosing to work in the public sector. Meanwhile, research in labor economics dating to Roy (1951) and Heckman (1974) provides tools to deal with problems of endogeneity and selection bias that arise in these contexts, as a result of the presence of unobservable skills or preferences.

In this paper we estimate a Roy sector choice model in order to simulate the effects of a range of counterfactual wage policies in the Colombian public sector and analyze their consequences on the attraction of human capital. The dataset on academic and labor outcomes is derived from students who received financing for their graduate studies abroad from a Colombian NGO. Our research question is related to the effectiveness of monetary incentives in attracting qualified individuals to public sector employment. Our unit of analysis is the individual, before and after graduate studies. Our data is the result of the combination of administrative data from loan applicants between the years 2002-2007, and a follow-up survey carried out in 2013 containing questions on work outcomes.

The proposed model follows a Roy structure, where individual sector choices and wage offers are simultaneously determined as functions of individual characteristics. In this framework, sectors offer wages as a function of individual characteristics, while individuals choose their job sectors based on the utility they derive from their wages, their preferences towards the public sector, and other sociodemographic traits. Estimation reports the effects of these variables on wage offers and sector choices. Additionally, as estimation results provide the distribution parameters for utility and wage shocks, it is possible to simulate counterfactual choices in the presence of hypothetical changes in wage offers, as well as their effects in the overall labor market. Finally, these results can be used to infer the necessary changes in wage offers to attract individuals in the margin to the public sector.

The aforementioned estimation and simulation results imply policy recommendations for the attraction of human capital in developing countries, as well as further avenues for research. In first place, it is possible to evaluate the effectiveness of public sector wage policies aimed at attracting highly educated individuals versus identifying individuals with high levels of public service motivation. Additionally, the panel characteristics of our data allows us to inquire if the role of public service motivation varies across the life cycle.

References

Heckman, J. J. (1974). Shadow Prices, Market Wages, and Labor Supply. Econometrica, 42(4), 679– 694

Perry, J. L., & Wise, L. R. (1990). The Motivational Bases of Public Service. Public Administration Review, 50(3), 367–373.

Roy, A. D. (1951). Some Thoughts on the Distribution of Earnings. Oxford Economic Papers, 3(2), 135–146.