Wait Unemployment

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PIDE Working Papers 2007:20

Preference for Public Sector Jobs and Wait Unemployment: A Micro Data Analysis

Asma Hyder
Visiting Fellow Pakistan Institute of Development Economics, Islamabad


All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means—electronic, mechanical, photocopying, recording or otherwise—without prior permission of the author(s) and or the Pakistan Institute of Development Economics, P. O. Box 1091, Islamabad 44000. © Pakistan Institute of Development Economics, 2007.

Pakistan Institute of Development Economics Islamabad, Pakistan E-mail: publications@pide.org.pk Website: http://www.pide.org.pk Fax: +92-51-9210886 Designed, composed, and finished at the Publications Division, PIDE.

CONTENTS Page Abstract Introduction Some Background Issues Data Econometric Methodology Empirical Results Conclusions Appendices References List of Tables Appendix Table 1. Variable Descriptions Appendix Table 2. Variable Summary Statistics 11 12 v 1 2 2 4 6 9 11 17

Appendix Table 3. Job Preference and Unemploym Duration Models 13 ent Appendix Table 4. OLS Wage Equation Estimates for Sectoral Equations Appendix Table 5. Public Sector Wage Differentials Appendix Table 6. Multinomial Logit Results 14 15 16


ABSTRACT This paper exploits responses on the stated preferences for public sector jobs among a sample of unemployed in Pakistan to inform on the existence of public sector job queues. The empirical approach allowed job preference to influence unemployment duration. The potential wage advantage an unemployed individual would enjoy in a public sector job was found to exert no independent influence on the stated preference indicating that fringe benefits and work conditions are perhaps more important considerations. The stated preference for a public sector job was found to be associated with higher uncompleted durations. The estimated effect suggests that, on average and controlling for education and other characteristics, those unemployed who stated a preference for public sector jobs had higher uncompleted durations of between four and six months. This finding was taken to confirm that there are long queues for public sector jobs in Pakistan.

JEL classification: J31, J64 Keywords: Wage Differentials, Wage Structure, Unemployment: Models, Duration, Incidence, and Job Search

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INTRODUCTION The existence of sizeable reward differentials between the two sectors ensure that public sector jobs are coveted in many developing economies, and particularly so by the more educated [see Blaug (1979)]. This can give rise to job queues and wait unemployment given risk-averse agents’ preferences for stable and well paid public sector jobs. Although it is possible to interpret wait unemployment or queuing as part of an optimal job search strategy, there may be sizeable private and social opportunity costs associated with such behaviour. The purpose of this paper is to explore the relationship between public sector job preferences, as expressed by unemployed individuals and their unemployment duration in Pakistan. The data used in our analysis are drawn from the Pakistan Labour Force Survey of 2001-02. Since the early 1990s the government of Pakistan has been committed to the implementation of a set of deregulation and liberalisation policies, which incorporates some degree of down-sizing in the public sector. However, public sector employment still comprises over one-half of all wage employment in Pakistan and, in spite of the re-orientation of the economy towards the private sector in recent years, the competition for employment in the public sector remains keen. Public sector employment in Pakistan is still viewed as attractive because of better pay, better work conditions, and the availability of an array of fringe benefits (e.g., pension rights and free...
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