Labour mobility in Bolivia: a comparison between public and private sector employees

Abstract

This paper estimates structural parameters of both a simple and an extended job separation model with the purpose of understanding constraints in the labor market in Bolivia. The results confirm the hypothesis that skilled labor is a scarce commodity in Bolivia, while unskilled labor is abundantly available. This implies that skilled employees shop around for alternative employment opportunities and quit jobs when a better opportunity arises. The quit rate among skilled employees in the private sector is much higher than the quit rate among skilled employees in the public sector. The reverse is true for the lay-off rate, and together this suggests that the private sector has difficulties maintaining its skilled labor. The results suggest that the public sector in Bolivia, inflated by high levels of foreign aid (about per cent of GDP), may be detracting scarce human resources form local productive sectors potentially jeopardizing the opportunity for sustainable development.