Effects of Government Jobs on the Labour Market in Bangladesh

Abstract

This paper empirically studies the implications of attractive government jobs for labour market. Exploiting an age ceiling policy that sets the age limit for eligibility for public employment at age 30, the study finds that the likelihood of private sector employment is about five percentage points higher for ineligible than eligible at the cutoff age of 30, mainly driven by females, particularly after doubling the public service salaries. The increase in employment after expiring the eligibility for government jobs is explained by increasing labour force participation rather than declining unemployment. During the eligibility period, candidates repeatedly try for government jobs and delay the pursuit of other opportunities, incurring substantial monetary expenses, time costs, and opportunity costs of time. At the same time, there is some evidence that public sector exam preparation gives rise to brain gain. While several papers studied this phenomenon theoretically, this study contributes by providing empirical evidence. The data for this study was drawn from population censuses and labour force surveys for the period 1991–2017 and a primary survey conducted online for this study in Bangladesh, and labour force surveys of India for 2011–2012, 2017–2018, and 2019–2020.