Seminar

Abstract: This paper studies the decision of Swedish employees to work in the private or public sector. While the existing sector choice literature focusses on (spot) wage differentials, this paper studies additionally how the expected payoffs from internal promotion tournaments affect sector choice. Jobs promising higher wage ‘prizes' and with higher a priori likelihoods of winning those prizes (i.e. being promoted) should be preferred over more competitive tournaments with lower prizes. Using economy-wide Swedish employer-employee-matched data, the paper estimates how firm-internal wage profiles and the competitiveness of the pyramidal structure matter for sector choice.