Self-Selection in the Market of Teachers

Abstract

Public school teachers usually have centralized earning schedules, where their income depends mainly on experience. On the contrary, in private schools, there is high wage dispersion, and salaries respond mainly to teacher's performance. That dichotomous labor regulation encourages teachers with better unobservable skills to self-select in private schools because the likelihood of earning higher wages is higher than in public schools. The other side of the coin is the existence of \bad" teachers self-selecting in public schools. Using a representative sample of Chilean teachers, we estimate a two-sector Roy model to test self-selection. We find evidence of negative self-selection of teachers in public schools.