Talent in the public sector: The role of migration and housing policies

Misallocating talent can have significant costs for society. Previous studies have shown that reducing mobility barriers enhances talent allocation across regions, yet the impact on talent allocation between the public and private sectors, as well as the quality of the public sector, remains unclear. This paper presents a two-city, two-sector model incorporating endogenous location and occupational choices to address this gap. We find that changes in the value or supply of residence quotas (hukou) do not always influence public employment quality. We also analytically characterize the conditions under which they do, which involve the value and supply of hukou, wages in the government sector, and productivity differentials across cities. In the same environment, however, changes in land availability do not affect talent distribution across the public and private sectors.