Despite increasing calls on the state to manage major challenges, in the existing literature, the state – and public sector activities more generally – tends to be overlooked as an agent of regional change. The role of public sector jobs is often taken for granted, with diverse empirical findings being strongly influenced by geography and time period, if they are considered at all. We discuss two main threads of research on contemporary public sector employment that could enhance our understanding of the role of the public sector in regional development (i.e. human capital formation and diversification).