Reducción del empleo público redundante, capital humano y ajuste en una economía abierta

Abstract

The purpose of the paper is to build an appropriate theoretical framework to study agregate aspects of the adjustment of small open economies subject to an important reduction of public-sector overmanning. Hence, the specific goal is to analyze the timing of the policy, the characteristics of the ensuing process of human capital accumulation, and the dynamics of real exchanges rates, real wages and international account balances. Reasons to expect an overshooting of real wages are persuasive and should not be neglected, specially when individuals perceive sizable wealth gains and are free to engage in international borrowing and lending of funds, an unskilled workers must invest somewhat in themselves before entering private labor markets.